Liberia: Issues and Options in the Energy Sector

Report No. 5279-LBR Liberia:Issues and Options in the EnergySector Public Disclosure Authorized

December 1984 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Reportof the Joint UNDP/WorldBank Energy Sector Assessment Proam This document has a restricted distribution. Its contents may not be disclosed without authonzation from the Govemment, the UNDP or the Worid Bank.

... JOINT UNDP/WORLD BANK ENERGY SECTOR ASSESSMENT PROGRAM REPORTS ALREADY ISSUED

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Indonesia November 1981 3543-IND Mauritius December 1981 3510-MAS Kenya May 1982 3800-KE Sri Lanka May 1982 3792-CE Zimbabwe June 1982 3765-ZIM Haiti June 1982 3672-HA Papua New Guinea June 1982 3882-PNG Burundi June 1982 3778-BU Rwanda June 1982 3779-RW .Malawi August 1982 3903-MAL Bangladesh October 1982 3873-BD Zambia January 1983 4110-ZA Turkey February 1983 3877-TU Bolivia April 1983 4213-BO Fiji June 1983 4462-Fli Solomon islands June 1983 4404-SOL Senegal July 1983 4182-SE Sudan July 1983 4511-SU Uganda July 1983 4453-UG Nigeria August 1983 4440-UNI Nepal August 1983 4474-NEP Gambia November 1983 4743-GM Peru January 1984 4677-PE Costa Rica January 1984 4655-CR Lesothc Tanuary 1984 4676-LSO Seychelles january 1984 4693-SE'Y Morocco March 194 4157-MOR Portugal Acri; i984 4824-PO Niger May 1984 4642-NIR E;thiopia Ju`v 1984 4741-ET C.ape Verde Auzust 1984 5073-CV Guinea Bissau Auzaust 1984 5033-CUB Botswana Seotember 1984 4'998-BT St. Vincen: and the Grenadcnes September 1984 5103-STV St. Lucia Sep1e r 984 5111-SLU Paraguay Oc' h.er 1984 51'5-PA Tanzania Ncve.-nber 1984'959-TA FOR OFFICIAL USE ONLY

REPORT NO. 5279-1BR

LIBERIA

ISSUES AND OPTIONS IN THE ENERGYSECTOR

DECEMBER1984

This is one of a series of reports of th- Joint UNDP/World Bank Energy Sector Assessment Program. Finance for thiework has been provided, in part, by the UNDP Energy Account, and the work has been carried out by the World Bank. This report has a restricted distribution. Its contents may not be disclosed without authorization from the Government, the UNDP or the World Bank. ABSTRACT

The economy of Liberia has been in decline since 1979 and the prospects for future economic growth are uncertain. Between 1979 and 1983, the modern sector GDP was estimated to have declined at a rate of 5.6Z per year. The impact of the lessened demand for Liberia's export products,especially iron ore, has been magnifiedby poor managementof the economy and of the major state-owned enterprises. The two main energy parastataLs- the Liberian ElectricityCorporation (LEC) and the Liberian Petroleum Refining Company (LPRC) -- are now threatenedwith severe liquidityproblems. Three main themes have been pursued in this report to address the severe issues facing the Liberian energy sector: restoring financiaL viability to LEC and LPRC; maximizing the serviceability and productivityof installed energy production,storage, and handling capacity in the petroleumand power sectors;and optimizing the exploitation and replenishment of presently abundant woody fuel resources. An energy sector investmentprogram of US$60 million is put forth between 1984 and 1993,and technicalassistance projects are recommended to assist in the implementationof the investmentprogram. ABBREVIATIONSAND ACRONYMS

Abbreviations bbl barrel bd bone dry GJ gigajoule GDP gross domestic product GWh gigawatt hour ha hectare kg kilogram KVA kilovolt ampere kW kilowatt kWh kilowatt hour 1 liter LPG Liquified Petroleum Gas m mcwb moisture content, moisture content wet basis * cubic meter M,M thousand MM million MVA megavolt ampere KW megawatt KWh megawatt hour OD oven dry sv,s solid volume, solid tonne,te metric tonne toe tonnes of oiL equivalent tpa,tpy tonnes per annum, tonnes per year

Acronyms AfDB African Development Bank EFMC Econonic and Financial Management Committee LEC Liberia ELectricity Corporation LPRC Liberia Petroleum Refinery Corporaticn GOL Government of Liberia DOE Department of Energy MLME Ministry of Lands, Mines and Energy FDA Forestry Development Authority NEC National Energy Committee ORNL Oak Ridge National Laboratory This report is based on the findings of an energy assessment mission which visited Liberia in February, 1984. The mission assignments were, K. Newcombe, Mission Leader, Power Sector Management and Household Energy; H. Ansari, Deputy Mission Leader, Petroleum Sector Co-ordination and Institutional Arrangements; G. Alibaruho, Economist, Macroeconomic Linkages; G. Herrmann, (Cons) Power Systems Planning and Engineering; R. Chronowski, (Cons) Wood- fired Power Systems and Industrial Energy; G. Duxbury, (Cons) Petroleum Economist; J. Russel, (Cons) Petroleum Procurement and Transportation Issues; J. Shillingford, (Cons) Refinery and Depot Engineering and Economics. Ken Newcombe was the principal author of the report. CUB ENY ND EEGY ZQUIVALENTS

cUrRC US$1.00 = LiberianDollar $1.00

CONVERSIONFACTORS 1 MJ = 948 BTU = 239 Kcal = 0.278 kWh 1 kWh = 3.6 MJ 1 US gaLlon = 3.79 liters 1 toe = 42.74 GJ = 6.82 barrelsof oil equivalent,bbloe

Major Fuels MJ/i Toe/te 1/toe

PetroleumProducts AviationGasoline 33.1 1.11 1436 Gasoline 34.3 1.09 1356 Kerosene 36.5 1.09 1271 Diesel oil 37.8 1.07 1209 Fuel oil 40.7 1.01 1065 LPG (butane) 25.4 1.16 1723

Woodfuels Firewood(air dried,25%mcwb) 14.3 0.335 Charcoal(52 mcwb) 29.7 0.697

Firewood(oven dry) 20.0 0.468

Basic Densityof wood = 500 kg/m3 unless otherwisestated One tonne of wood equivalent= twe = 1000 kg of wood at 25Z mcwb = 14,300 MJ

Electricity

Thermal equivalent(supply) = 4037 kWh per toe (at 34X thermal efficiencyunless otherwisestated). TABLE OF CONrENTS Page

SUMMARY AND RECOMMENDATIONS...... i I. ENERGYAND THE ECONOMYOF LIBERIA...... 1 Country Background ...... -. 1 Trends in EconomicPerformance ...... 1 Energy and the Economy...... 2 Indicesof Change in the Energy Economy...... 3 The Present Patternof Energy Consumption**...... 3 Recent Trends in Power and PetroleumConsumption ...... 6 Future Energy Demand ...... 8 Changing Fuel Mix...... 10 Energy Pricing ...... 11

II. PETROLEUM...... 14 Background ...... 14 PetroleumResources ...... 14 Petroleum Product Demand ...... 14 Supplyof Petroleum ...... 16 Port Facilities...... 17 ProcurementArrangements ...... 18 Product PurchasingPerformance...... 19 Other Componentsof the Landed Price...... 20 Final Cost of PetroleumSupply at the Depot*& ...... a 21 ShortTerm Measures...... 23 Financingof Petroleum Imports...... 23 Distribution Costs.....6-0-060 ...... 24 Private Sector RoLe in ProductSupply . . 25 Options for PrivateSector Involvementol ...... em....en.t. 26 Product Storage Capacity...... 26 Parcel Size Limitations ...... 28 Prospectsfor Oil Refiningin Li b ...... e r i a 28 InstitutionalIssues and Options . . 29 PetroleumInvestment and Technical Assistance Requirements...... 30

III. ELECTRICITY ...... e-sov...... e.e...... 31 Introduction ...... 31 InstitutionalArrangements ...... 31 The Power System .... 00 ...... 32 Short Term Problems ...... 36 Current FinancialStatus ...... 36 Liquidity ...... 0...... 36 Non-Technical Losses ...... 37 Reducing Non-Technical Losses...... 37 Privatization ...... 39 ReducingTechnical L o...... s s e s 39 rmplementation...... 40 EfficientUse of ELectricity...... 41 Page

Electricity Demand Projections...... 42 Financial Projections...... 43 Generation Needs and Options...... 43 Immediate Supply ...... 44 Long Term Supply Agreement with BMC...... 45 Fuel Oil Fired Dieselse...... 46 Wood-fired Steam Power Generation...... 46 Coal as a Power Source...... 47 Hydropower...... 48 Upgrading the Mt. Coffee Hydropower Station...... 49 Conclusions and Recommendations on Generation Expansion ...... 50 Generation and Transmission Planning Studies...... 51 HydroLogy...... S1 Transmission Expansion...6.06606606-see ...... 52 Isolated Supply Systems...... 52 Alternative Energy Supply for Isolated Power Generation...... 55 Electricity Pricinge.e.e...... 56 Short Run Marginal Cost of Hydropower...... 0...... 56 Long Run Marginal Costs...... 56 Tarif fs...... 0. 0...... 4. 000. a6...... 56 M-anagement Isus...... 58 Subsector Investment and Technical Assistance Requirements...... e...... 59

IV. HOUSEHOLD AND INDUSTRIAL ENERGY...... * 62 Introduction...... 62 Household Energy...... 62 The Pattern of Household Energy Use ...... 62 Comparative Economy of HousehoLd Fuels...... 63 Woodfuel Supply and Demand...... 66 Present Woodfuel Resources...... 66 National Woodfuel Demandt...... e...... e.e...... 67 Supply and Demand of Woodfuels to Monroviao.s...... 67 Rubber as an Energy Crop...... 68 The Economics of Rubbertree Wood Charcoal Production... 70 Policy Implications and Recommendations...... 72 Other Woodfuel Resource Management Optionse...... 72 The Charcoal Industry...& ...... o .... 74 Improved Charcoaling Efficiency...... 74 The Prospect for Exporting Charcoal...... O.. 75 Modifying Demand for Household Cooking Fuels....e..... 78 Kerosene and LPG Supplies...... 80 Solar WaterHeating...... * ...... & 80 Industry...... es...... 0.00...... 81 Energy Efficiency in Manufacturing...... 81 Interfuel Substitution in the Manufacturing Sector..... 82 Risks and Logistics ...... 84 Page

V. INVESTMENT, INSTITUTIONAL ARRANGEMENTS AND MPOW...ER...... 85 Energy Sector Investment....6...... 0.....e.g...... 85 Revised Energy Sector Investment Program ...... 86 Investment Priorities...... 87 Source of Funds ...... 0 89 Energy Planning, Institutions and Manpower Needs...... 89 Institutional Arrangements...... 060000000.... 89 Energy Planning...... 90 Role of an Energy Policy and Planning Division 0. o...... 91 Prerequisites for Effectiveness...... 000...... 92 Policies and ...... 92 Manpower Needs...... * 92 Technical Assistance...... e...... e...... 93

ANNEXES

1. Energy Balance, 1983...... 95 2. Energy Balance,1993...... g...... **** 96 3. Border Price Build-up for Liberia, First Quarter 1984.... 97 4. Ex-Depot Price Build-up...... 98 5. 1983 Purchase/Sales Pattern...... 99 6. Estimated Oil Product Consumption, 1983...... 100 7. Product Prices Paid by LPRC Compared to International Spot Market Levels, 1983...... 102 8 Main LPRC Tankage...... 104 9. Economics of Refining in Liberia, 1988 and 1993...... 105 10. RefiningOptions ...... 111l...... 11. LPRC Staff Distribution and Numbers...... 114 12. Schedule of Installed and Available Generating Plant..... 115 13. Statistics on the Nature and Performance of Government Isolated Power Systems, 1982/83...... 116 14. Historical Trends in Sales and Generation...... 117 15. LEC Actual & Projected Income & Expenditure Statements...... 00...... 118 16. Proposed Regulations and Corporate Reorganization of LEC .... .6*** 0*...... 119 17. Assumptions for Energy and Power Sector Demand Forecast ...... * 123 18. LEC Historical and Projected Sales...... 125 19. LEC Historical and Projected Generation Mix and Fuel Consumptione...... e.e.o... 126 20. Parallel Operation of BMC and LEC Systems .. 0 ...... 127 21. Cost of Production from Modern Slow Speed Diesels...... 128 22. Wood Fired Steam Power...... *0 129 23. Operations Cost of Coal Fired Steam Generating Plant..... 131 24. Generation Equipment for Government Isolated Power Systems, 1983...... 132 25. Wood Steam vs. Wood Gasification Power Pl ant...... 133 26. Estimation of Long Run Marginal Costs For Monrovia...... 137 27. Firewood Prices, 1984...... o ...... 138 28. Charcoal Prices, 1984...... 139 Page

29. Forest Resources, 1983 ...... 140 30. Estimated Rubber Tree Stand, 1983...... 141 31. Plantation Timber Resources, 1983...... 142 32. Current and Projected Woodfuel Use by Households...... 143 33. Woodfuels Supply and Demand to Monrovia Households...... 144 34. Price Build-up for Charcoal in Liberia, 1984...... 145 35. Energy Sector Investment Program, 1984-93...... 0.....146

TABLES 1. Final Energy Consumption 1.1 Trends in GDP and Modern Energy Consumption 1.2 Petroleum Imports, Re-exportes,and Total Merchandise Trade, 1976-82 1.3 Final Energy Consumption, 1983 1.4 Energy Intensities of Selected Regional Countries, 1981-82 1.5 Recent Consumption Trends for Petroleum and Power 1.6 Final Consumption of Petroleum Products by Sector, 1982 1.7 Significant Future Trends in Energy Supply and Consumption 1.8 Petroleum Prices and Costs, Monrovia, Liberia, First Quarter, 1984 2.1 Development of Petroleum Products Consumpti3n, 1979-83 2.2 Mining Sector Fuel Requirements 2.3 Countrywide Petroleum Demand Forecast 2.4 Premia Paid by LPRC on 1983 Imports 2.5 LPRC's Other Purchasing Costs 2.6 Simplified Comparison of Costs of Petroleum Products Import 2.7 LPRC Refined Petroleum Product Storage Capacity, 1984 2.8 Petroleum Sector Investment Program 3.1 Installed Capacity of Electrical Generating Plant in Liberia, 1983 3.2 Estimated Power Generation in Lib-ria, 1983 3.3 Generation and Sales for the Monrovia Power System, 1979-83 3.4 Generation and Sales Projection for the Monrovia Power System 3.5 Short Run Marginal Costs of Thermal Generation, 1984 3.6 Hydropower Resources of Liberia 3.7 Characteristics of IsoLated Generating Systems, Liberia, 1982-83 3.8 Load Projection for Isolated Generating Stations, Liberia, 1984-93 3.9 Long Run Marginal Cost Estimates, Monrovia Power System 3.10 Power Sector Investment Program, 1984-93 4.0 HousehoLd Energy Consumption, 1983 4.1 Comparative Cost of Household Energy Forms in Monrovia, First Quarter, 1984 4.2 CharcoaL Production Costs, 1983 4.3 CharcoaL Production Costs Using Improved Metal Kilns 4.4 Possible Charcoal Export Price Structure 4.5 Cost of Cooking in Liberia with Present and Improved Stoves 5.1 Overview of Energy Investment in the Public Sector, 1976-87 5.2 Average Annual Component of Public Investment Program by Sector, 1981-87 5.3 Major New Investments by Priority Class 5.4 Energy Sector Investment Program: 1984-93 MAPS IBRD 12867R: CountryMap IBRD 18368: OffshorePetroLeum Exploration IBRD 18383: Generationand TransmissionNetwork MAIN FINDINGSAND COECLUSIG0S

1. Liberia has a populationof about two million and a land area of 112,000 square kms. It's economy has been in decline since 1979 and prospects for future economic growth are uncertain. There is a sharp division between the modern sector of the economy, which is largely con- fined to urban areas, the enclave mining, rubber and forestry concessions, and the traditionalrural sector. The latter is characterisedby shifting cultivation,and remains little influencedby the developments in the former. Between 1979 and 1983, modern sector CDP is estimatedto have declined at the rate of 5.62 per annum, and with the present depressed global market for iron and steel it is clear that all of Liberia's iron ore mines will continue to face problems and may close within the nezt ten years, limitingprospects for fast economicgrowth. The plantationsector, comprisedprimarily of rubber, but also palm oil and other tree crops, has better prospects. The impact of the declining demand for Liberia's export products, especially iron ore, and their increased costs of production in the aftermath of the the 1979/80 oil price increases,was exacerbatedby poor managementof the economyand of major state owned companies in particular. In fact, both major energy parastatals(the Liberia ElectricityCorporation (LEC) and the Liberia Petroleum Refining Corporation(LPRC)) are now threatened with severe liquidity problems despite energy prices and margins that, in normal circumstances,would generateconsiderable profits.

Table 1: FINAL ENERGYCONSUMPTION a/ ('000 toe)

Biomass Percentage Fuels Electricity Petroleum Total Share

- 1983- Mining and Other Industry 4.4 55.9 46.4 104.1 11.6 Transport - - 147.6 147.6 16.1 Agriculture - 1.9 5.7 7.6 0.8 Bouseholds 625.7 9.0 4.5 639.2 69.7 Coouerce/Government 12.0 4.2 16.2 1.8 Total 630.1 76.2 208.4 917.3 Share (Z) 68.7 8.7 22.7 100.0

- 1993 - Mining and Other Industry 10.2 3.5 2.2 15.9 1.5 Transport 175.2 175.2 16.0 Agriculture 1.9 9.1 11.0 1.0 Households 845.9 14.3 6.7 866.9 79.4 Coerce/Government 17.9 4.5 22.4 2.1 Total 856.1 37.6 197.7 1091.4 Share (X) 78.4 3.5 18.1 100.0 a/ Consumptionat the point of end-use. Source: Annexes 1 and 2. - ii -

The pattern of final energy consumption is summarized in Table 1.1. From 1980 to 1984, Liberia's consumption of petroleum and electricity declined in line with economic activity and is projected to decline further, both in absolute terms, and relative to the consumption of traditional biomass fuels, particularly during the early 1990s as the Bong mine closes. Con- versely, over the same period the share of firewood and charcoal is projected to increase from about 70% to 80%. While Libe-ia's present per capita energy consumption of 438 kgoe per year is well above that of its neighbours, the likelihood is that this distinction will be shortlived. In effect, the Liberian energy economy is in a transition just the oppo- site of most developing economies where the share of modern fuels of the total energy mix increases as urbanization and industrialization proceeds. In Liberia, the overall growth in energy supply over the 1984- 1993 period is expected to be 3.6% p.a., or marginally higher than population growth, and its source will be almost exclusively woodfuels. The declining demand for modern fuels has far-reaching implications for power and petroleum subsector management and planning, and the growing demand for woodfuels raises important questions regarding the optimal exploitation of the country's forests.

Overall Energy Strategy

2. Three main themes of a comprehensive energy strategy emerge from this energy assessment:

(a) Restore financial viability to the main public sector energy supply and production agencies - the Liberian Electricity Cor- poration (LEC) and the Liberian Petroleum Refining Corporation (LPRC). So long as these parastatals are unable to generate sufficient surpluses for adequate maintenance and for capital investment there is little prospect of reliable and reasonably priced energy supply. The achievement of this objective will require upgraded management and strict enforcement of payment of energy accounts supported by new legislation, regulations and consumer billing practices and a determined political will to succeed.

(b) Maximize the serviceability and productivity of installed energy production, storage and handling capacity in the petroleum and power sectors. While there is either declining or almost stagnant markets for modern energy forms, maximum benefit will be derived from the rehabilitation of existing facilities in each subsector, with the exception of the refinery which should be dismantled forthwith. Crash programs to re- meter consumers, redesign and refurbish electrical distribution and to rehabilitate economically serviceable ceieration plant are required. Similarly, maximum use is to be made of under- utilized generating plant within the enclave mining sector in preference to purchase of new generating equipment. In the - iii -

petroleum subsector,storage facilitiesshould be revampedand port handling equipment upgraded to facilitate efficient operation of a petroleum depot relocated at the Water Front area insteadof at the old refinerysite. (c) Optimize the exploitationof presently abundant woody fuel resourcesin order to reduce the destructionof accessiblehigh forest and to increasethe benefit to the economy of the consumption of woodfueLs by using wood from retired rubber tree plantations. Resource inventories,systematic incentives for private sector exploitationof the least cost forest resources and the demonstrationof modern efficient productionand end- use equipmentwill be required.

Key Issuesand Options

PetroleumSubsector

3. Until 1982, petroleum products were produced at the Govern- ment's refinery in Monrovia under the management of its wholly-owned Liberian PetroleumRefining Corporation(LPRC). The refinerywas closed at the beginning of 1983 due to the LPRC's inability to meet a major payment for crude oil. Subsequentlythe GOL decided not to re-open the refinery because further evaluation indicated that it was cheaper to import petroleum products than to refine them locally. However, LPRC staff had little experiencein product procurementand frequentlybought too late and paid above market rates. In addition,not only were most refinery cost centers kept active but new equipment was purchased and installedafter the Government'sdecision that the refinerywas not to be re-opened. Unauthorizedextraction of petroleum products added further to the costs of petroleum supply. The LPRC managementis also burdened by serious litigationfollowing the collapseof crude oil supply arrangements, and by confused debtor-creditorobligations and, as a resutlt,is unable to devote sufficientattention to day-to-dayproblems of operational inefficiency. The net result of these problems in 1983 was an additionaland avoidablecost burden of at least US$13 million, or about US$77 per tonne of product imported by the LPRC. The key issues in the sector are, then, how best to improve the efficiencyof petroleumpro- curement and supply to the wholesale market, and whether to completely dismantleor to mothball the refinery. Of even more immediateconcern is the need to secure for the LPRC sufficientliquidity to procure product when required and in the desired quantities. By February 1984 the company's effective reserveshad fallen so low that it had to reduce cargo sizes to make ends meet against rising costs. LPRC's solvency is threatened both by the ongoing inability of the Liberian Electricity Corporationto fully pay for products suppLied,and by its own inefficiency. The most important of the measures nroposedby the mission to resolvethese problemsare as follows: iv -

(a) dissolve the LPRC and form a Liberian Petroleum Supply Company with the sole objective of importing and wholesaling petroleum products. As part of this re-arrangement all present refinery cost centers should be closed, staff retrenched, salable assets reaLised, and a clear determination made of the current finan- ciaL and legal obligations of the LPRC.

(b) procure the services of an experienced oil industry company to manage under contract the new supply company, to train Liberian staff to operate the company within three years, and to expe- dite the liquidation of LPRC assets and the re-employment of staff qualified and suitable to serve the new company. Staff employed in petroleum supply should be reduced from 480 to a maximum of 85 in the process.

(c) dismantle the refinery to the extent of its saLable components, rent or sell office facilities, and move the site of the petroleum depot to the Water Front area in the port of Monrovia.

(d) Upgrade the storage at the Water Front area as well as off- loading and other handling facilities to promote efficient and cost-effective operations in the new location. This will require an investment of about US$7.5 million which must be prepared by an immediate engineering design and costing study.

Power Subsector

4. Power supply to the Monrovia power system (MPS) fell at almost 22 per annum between 1980 and 1984. Throughout this period losses have been about 35% of generation (20% unbilled consumption and 15X technical losses). Since only about 70X of electricity officially sold is paid for, this means that payment is received for less than half of the electricity generated. Tariffs are at least 50X higher than the present costs of production and the long run marginal costs of supply. Until recently the LEC was able to remain solvent because of the large difference between the cost of supply and tariffs, which were raised as required. Now the LEC is faced with stricter te-ms of credit, higher costs of production due to the growing use of gas turbines, and a further tariff increase is unlikely to be acceptable to the Government. During the 1984 dry season a major fuel oil fired engine generator set failed and, as with the previous dry season, supply was at best intermittent. LEC chose to meet supply with gas turbines which have direct costs of production well above the tariff level, instead of negotiating additional supply from the Bong Mine (see para 3.3) of low cost fuel oil fired generation, or rehabilitating its lower cost diesel generators. Demand is forecast to grow at about 0.2% per annum over the next decade and subsequently the need for major new generating capacity is limited to securing supply at the present level, although an excellent opportunity exists for the suppLy of additional hydropower to the Bong Mine in return for thermal generation in the dry season and for sale on commercial terms. The most pressing problems are the theft of power and the failure -v-

to enforce payment for all electricityconsumption billed. Indeed if LEC is unable to pay the LPRC for petroleumfuels because it cannot enforce payment from its own consumers it may eventuallybe responsibleboth for its own and the LPRC's insolvency. On system planningand development, the mission believes that a combinationof generationand distribution rehabilitation,additional low speed diesels fired with fuel oil, and wood-fired steam power using Bomi Hills forest resources are part of a least cost solution. However, the precise conf_gurationand timing of the Least cost options for power suppLy must be determinedby the recommended planning studies. There is no economic justificationfor Large scaLe hydropowerdevelopment on the St. Paul and Mano riversfor at least a decade, and even implementingthe projects recommendedby the mission will pose serious fiscal constraints. In this context,major transmission constructionnow appears to have a lower priority in the face of urgent short to medium term generationand distributionrehabilitation requirements. In the mission's view, it would be useful to review with the AfDB the project recently negotiatedwith a view to possibly resche- duling it and emphasizingthe valuable metering component it contains. Similarly,in the isolatedsupply systems funded directLy by the GOL and managed by the LEC, costs exceed revenue by almost US$6 million per year compared with a budgeted subsidy of US$750,000,and plans are afoot to expand supply of both diesel, wood and hydropower to these systems. Under present circumstancesthis can only greatly increase the annual loss. The key issues center first on the means by which unpaid consumption can be cut, bills can be paid and the financial viability of the institutionrestored and, secondly, on the least cost means of supply over the remainderof the decade. In order for any program of reform to be successful,however, existing management practices will have to be changed and administrationimproved markedly, includingbetter staff dis- cipLine and wholly revised accounting, planning, decision making and operationalprocedures.

5. Urgentmeasures include:

(a) introductionof regulationsand proceduresdesigned to ensure payment for electricitysupplied and sharp curtailmentof unpaid consumption. These regulationswould have to be supported by new legislationto enable the LEC to quickLy apply strong penalties for non-compliance.Essential to the success of any such approach however, is the full and public support of government.

(b) rehabilitationand redesign of distribution facilities and metering all consumersnot served by an operationalmeter, and possibly the introductionof tamper-proof load limiters for consumerswith very low level power consumption. These steps are to be undertaken in parallel with the enforcementof new reguLations,and revision of consumer billing and accounting procedures. A comprehensivepower system efficiencyaudit is required to identify the highest priority measures and to prepare for a larger program of generation and distribution rehabilitation. - vi. -

(c) management of the LEC for a period of three years under an external management contract on a "fee plus" performance related basis. The contractor concerned would be specifically charged with implementing the reforms outlined herein, training staff to replace them in their management role in the near term, and reducing costs, including those for staff. The contractor would also assume respbnsibility for revising consumer billing and accounting procedures, and implementing metering and consumer level distribution rehabilitation programs.

(d) negotiation of an extended contract with the Bong Mining Com- pany for the supply of thermal power during the 1985 dry season to reduce reliance on high cost LEC thermal generation.

On the cost and source of power supply to rural towns:

(e) The average variable cost of production is 27C/kWh and the receipts average 4centslkWh, which led to a loss of US$5.3 million in the last financial year. This loss will grow rapidly to US$8 million per year if planned diesel installations proceed. Consequently, no additional capacity of any kind should be installed until the tariff is set at 15e/kWh in the first instance, and metering and billing arrangements are such that all consumers pay for supply at this level. In the longer term tariffs need to be raised to at least cover variable costs. If demand persists under these revised tariffs, a wood-fired steam plant appears justified in some supply centres and the interconnection of Gbarnga with the Monrovia Power System should be evaluated.

Household Energy

Woodfuel Resources

6. Liberia has forest cover of some kind over more than 80% of its landscape and in gross terms the annual production of fuel quality biomass substantially exceeds demand. However, woodfuel demand is localised and concentrated particularly in Monrovia, the largest urban center, which is now growing at 5-6% per year. In Monrovia, charcoal now domi- nates the household energy market and hence, with the low efficiency of conversion from wood to charcoal, the demand for fuelwood in the hinterland has grown rapidly in the past decade at the expense of nearby forests. By 1993, the demand for fuelwood is expected to be one-third higher than at present, suggesting that the pace of deforestation will quicken and that the price of woodfuels may rise in real terms as firewood and charcoal is transported from further and further afield. Thus, in contrast to the superficial impression that woodfuels are abundant, localized shortages may appear and it is now important to take stock of existing and accessible forest resources and to devise a strategy for - vii - least cost supply to the household and commercial/industrialwoodfuel market in the longer term. Perhaps the most important and economically attractive source of woodfuels for Monrovia and other urban areas is rubber plantations. Although rubber wood already supplies a portion of the Monrovia market for charcoal and firewood,the sustainableyield of rubberwood from retiredrubber trees exceedsthe annual demand for woodfuels into the 1990's and the cash receivedby smallholdersfrom selling their senile rubber trees can contribute substantially to replanting.

Charcoal Production

7. Firewood and charcoal production and supply is generally managed by a large number of smalLholders and entrepreneurs and, despite the constraints of traditional technology and poor transport infrastructure, the market is supplied adequately and efficiently. The role of government in woodfuels supply shouLd therefore be in support of the private sector by providing incentives to use the most economic woodfuel resources and to upgrade the efficiency of conversion from wood to charcoal. For example, the carbonisation of retired rubber trees should be promoted as an integral part of the rehabilitationof the smallholder rubber industry. Similarly, more efficient metal kilns and charcoal stoves offer some prospect of reducing pressure on the remaining closed canopy native forests within reach of the major urban areas. Finally, with the economic prospectsfor pulpwoodproduction fading, a case can be made for evaluating the managed exploitationof the designated State forest areas for the production of charcoal for export to countries in the West African region such as Mauritania, now suffering from deforestation and desertification.

8. Specificmeasures arising from the above include:

(a) a resource inventoryof smallholderand concessionplantations identifying the location and quantity of rubber tree wood availablenow and each year over the next decade at least.

(b) expansionof the demonstrationproject for low cost metal kilns and the establishment of a credit facility for their supply to smallholders prepared to exploit retired rubber trees, residues from organised forest clearing and other wastes for charcoal production.

(c) mounting a trial shipment of charcoal to Senegal or Mauritania as part of a feasibility study to identify logistical problems and the costs and benefits of the prospective trade.

(d) production and demonstrationof improved charcoal stoves from elsewherein Africa (for example,Kenya).

9. Other household energy options which appear attractiveinclude the use of solar water heating and the introductionof a range of more efficient kerosene stoves. Although both technologicalimprovements - viii - offer considerable financial benefits to the indir'lual consumer even their widespread adoption would only generate small economic benefit to the economy in comparison with other options identified here for reform in energy production and supply. Hence, for the time being, Government assistance should be limited to modest promotion.

Industrial Energy

10. The manufacturing sector in Liberia is small and unlikely to expand significantly in the foreseeable future. Individual factories appear to have adjusted their energy consumption well to high prices and uncertain supplies. There are no outstanding cases for substitution of oil by fuelwood as residual fuel oil is already widely used for heat and steam raising. The enclave sector managers have also implemented many important fuel economy measures in recent years. The two biggest rubber producers have installed wood-fired boilers and the Bong Mine has fine- tuned process heat and thermal power production. There is, however, an exceLlent economic prospect of substituting fuel oil with fueLwood in iron ore drying at the Bong Mine. The Bong Mine initiated this proposal in 1983 but was unable to attract acceptable tenders for fuelwood supply. The mission was able to define the costs and logistics of fuelwood supply to the mine and found that annual fuel oil import costs can be reduced by about US$1.3 million and the BMC can save US$1 million per year using already existing but unutilized plantation timber resources. The key constraint to the implementation of this fuel substitution option is that the Bong Mining Company, faced with the present depressed market for its ore, is unwilling to offer a purchase contract of longer than one year at a time. Avenues should be investigated by which this investment barrier may be overcome including:

(a) a precise definition of the investment required by an entrepreneur supplying fuelwood and by Bong Mining Company, and

(b) the provision by the GOL of risk capital of the order of US$500,000 providing a one-year sales contract can be secured with Bong Mine by the local fuelvood supplier concerned.

Energy Pricing

11. Energy prices in Liberia are characterised by being, cn the whole, cons,derably higher than the economic costs of production or supply. For electricity supplied to the MPS, if consumer billing and utility management reforms proposed by the mission are implemented, it should be possible to reduce tariffs in real terms in the 1986 wet season. Petroleum products are retailed at 2-3.5 times their border prices, hence the main pricing consideration is the extent to which gasoline and diesel taxes are used to generate government revenue. Govern- ment and concession prices for diesel and fuel oil are very close to border prices and there is a case for slightly increasing the price which LPRC charges LEC for these products. The matter of serious underpricing of the electricity produced in the isolated power systems supplying smaller towns has been taken up earLier in para 5. - ix -

InstitutionalArrangements

12. Energy policy and planning is weak in Liberia,partly as a result of a shortage of staff and experiencein the Departmentof Energy (DOE), and partly because of the isolationof its parent ministry - the Ministry of Lands, Mines and Energy - from the mainstreamof decision- making in the Government. No energy sector investmentprogram is produced and hence there is no policy framework for the developmentof the sector. The existing vehicle for policy dialogue in the sector is the National Energy Committee(NEC). This body has advisorypowers only, and although it has served a useful role initiallyin raising awareness in Governmentof the gravity of the energy problem,and later as a forum for the ORNL/GOLenergy assessment,it is now time to make a transitionto a well staffed and equipped full-time energy policy and planning agency closely associatedwith the highest levels of Governmentdecision making. The major energy parastatals- the LiberianElectricity Authority and the Liberian PetroleumRefining Company - make their plans withoutmeaningful consultation with each other or the DOE, and promote them to the Ministriesof Finance, of Economic Affairs and Planning,and the Head of State, limiting criticalreview. Similarly,the Governmentis unable to adequatelymonitor the performanceof its energy companies because its directors lack both management experience and familiaritywith energy sectorbusiness. The main recommendationshere include:

(a) the formation of an energy policy and planningdivision within the DOE separate from any functions of the former Bureau of Hydrocarbonsand dissolutionof the NEC.

(b) the formulationof administrativeprocedures which would establish for this division a close advisory reLationshipwith the Economic and FinancialManagement Committee of the GOL. (c) representationof the head of the energy planning divisionor the Directorof Energy on the boards of the LEC and the LPRC or its successor.

(d) the provision of at least three full-time high level professionals for the energy planningdivision plus support staff and trainees and finance for at least four man-years of training per year.

Energy Sector Investment

13. Investmentprojects totallingUS$122 million (Table5.4), which include about US$80 million in foreign costs, are regarded as economically justifiedby the mission for the 1984/1993period. However, there are such seriousshort- to medium-termfiscal constraintson public sector investment that this will almost certainly mean that a smaller program of high priority investmentswill have to be adopted. A list of the higher priority inwestmentsis provided in Table 5.3 amounting to US$72 million.Those in this prioritycategory are urgent and need to be implementedwithout deLay. Those in the higher priority category are indicativeprojects still to be preciselydefined by engineeringdesign and costing studies and Least cost planning studies. About 80Z of this investment is required in the power subsector. This reduced program avweragesUS$7 million per year comparedwith a maximum resourceavaila- bility for public sector investment in the next few years of US$100 million p.a., althoughmajor investmentis believedto be requiredearly in the program. The major constraintson public sector investmentgener- ally appear to be the provision of the local funds componentof major projects. Both the LEC and the LPRC could generate sufficient local funds and a substantialproportion of the foreign funds required to finance their investmentprograms provided proposed reformsare made in their operations. Yet it seems unlikelythat significantnew donor funds will flow to the energy sector unless the energy parastatalsdemonstrate a capabilityto reform,and to restoretheir own financialviability.

PriorityActions

14. The following are the highest priority activities proposed within each subsector,with the likely cost and duration in brackets:

Petroleum

(a) Design, costing and priority ranking in terms of benefit to operational cost and efficiency of investmentsrequired to transfer the petroleum depot from the refinery to the Water Front area, and to rehabilitateand reconfigurestorage and handlingfacilities ($200,000, three months).

(b) Procurementof managementservices to establishand operatethe proposed new Petroleum Supply Company for three years and to liquidatethe assets of the LPRC ($600,000per year, six months to establish).

Power

(a) Power system efficiencyaudit to define the investmentsecono- mically justifiedin distributionand generationrehabilitation and to review the serviceabilityof all thermal generating plant ($75,000,four months).

(b) Procurement of management services to manage and implement reforms in the LEC, including supervisionof remetering,distributionrehabilitation, re-organisation of accounting,establishment of effective management information and decision- making systems and high-levelmanagement training and development ($500,000per year, six months to establish).

(c) Bong Mine-LEC power exchange capacity review to determinethe present level at which power can be sent in both directions, and the transformer capacity, protection gear and other xi -

facilitiesrequired to facilitatetransfer up to 40MW ($30,000, two months).

HaLseholdEnergy

(a) Rubberwood and other forest energy resource inventorywithin reach of Monrovia and other urban centers (US$100,000,six months).

(b) Expansionof demonstrationproject for extensivefield trials of simplifiedmetal charcoalkilns (US$80,000,six months).

(c) Charcoal export feasibilitystudy which would also define the prospectof managingthe Cape Mount State forestsas a sustainable charcoalresource (US$100,000,six months).

Industry

(a) BMC fuelwood supply and conversion pre-investmentanalysis (US$50,000,three months). I. ERGY ANDTHE ECONY OF LIBERIA

Country Background

1.1 The area of Liberia is 112,000 square kilometers, more than half of which is covered by natural forest. At the end of 1982 the population was estimated to be about two million, with 35% classified as urban. However, the first census since 1974 was completed recentLy and may reveal a somewhat different demography. The economy is divided into two significant and quite discrete sectors, an enclave sector consisting of mining, forestry and rubber concessions dominated by multinational companies, and a subsistence agriculture sector. The latter supports more than 60% of the population, and all agricultural activities employ close to 80% of the work force. Industry and the service sector employ 7Z and 14% of the work force, respectively. Unemployment is estimated to be about 15Z of the potential work force and perhaps as high as 301 in the urban areas. The enclave sectors are the main source of foreign exchange hence the global demand for iron ore, and to a lesser extent rubber and timber, largely determines the economic performance of the modern sector. Iron ore mining alone accounts for about one-third of CDP, yet the links between this and other sectors are weak, resulting in uneven distribution of the benefits of their produ=tion, and localized infrastructure deveLopment. The estimated average per capita GNP in 1981 was US$520, whereas the enclave sector produced a per capita CDP of US$1,620, and the entire modern sector, US$780. These are in contrast with a per capita GDP of US$160 per year for the traditional sector.

Trends in Economic Performance

1.2 During the 1960s and early 1970s, the Liberian economy recorded high growth rates in CDP, 6% and 4Z per annum, respectiveLy. This impressive performance was due to increasing output and unit value from iron ore and rubber concessions and indirectly to an improvement in the terms of trade. This period came to an end in the mid-1970s as the price of oil rose, the demand for iron ore and rabber declined precipitously, and the cost of mining operations escalated. The impact of these adverse global trends was exacerbated by poor management of the public sector where the number of unprofitable parastatal entities mushroomed. Between 1974 and 1979, GDP growth fell to an average of only 1Z per annum. Signs of economic recovery in 1978 and 1979 turned out to be illusory; growth was partially the result of only a brief upturn in iron ore, rubber and timber prices. Also, economic activity was temporarily stimulated by a large injection of capital for construction of OAU conference facilities which yielded little more in the medium term than an enduring debt service problem. On top of a declining external demand for enclave product, a revolution occurred in 1980 causing social disruption and ushering in a period of inappropriate policies, especially in fiscal management; a - 2 - trend that persisteduntil recently. GDP in the modern sector declined by an average of 5.6% per annum between1980 and 1982, comparedwith 1.1% per annum since 1976, 1/ as indicatedin Table 1.1. In contrastto the early 1970s, the terms of trade also deteriorated,falling by 24.5Z between 1978 and 1982. Finally,the balanceof paymentshas deteriorated during recent years due largely to the ongoing flight of capital. The capital account surplus, which was over US$135 million in 1978 (20X of monetary GDP), fell to US$6.1 million by 1981 and has been negative since, illustratingthe devastatingnature of capital flight folLowing the rice riots of 1979 and the coup of 1980. On the other hand, the current account deficit narrowed from US$158 million (23.6% of CDP) to US$44.6million (6.2% of GDP) between 1978 and 1982.

Energy and the Economy

1.3 Trends in economic performanceand the consumptionof modern energy forms over the last 8 years are shown in Table 1.1, and the cost of imported petroleum is compared with total imports and exports in Table 1.2. For the most part, the directionof change in these indices is parallel, with petroleum consumptionfalling more sharply than CDP, which reflects the relative petroleum intensity of the volatile enclave economy. There is also a close relationshipbetween trends in electricity consumptionand GDP - a matter discussed again when reviewing the power subsectorin detail (see ChapterIII).

1.4 It is evident that, like most other developing countries, Tiberia felt the impact of the oil price rises of 1979-80. The proportion of total export earnings spent on petroleum imports rose from a little over 102 in the mid-1970s to about 25% in the early 1980s. Not onLy is the impact of oil importson the balanceof paymentsevery bit as severe in Liberia as in many other African economies, but because the foreign exchange for the procurementof petroleum products had to come from the public sector, the impact of oil procurement on Government fiscal and external balance of payments was disastrous. Indeed, financingpetroleum imports, together with debt service, have been the most important elements in the Government'sexternal payments problems. Until 1982, cr-de oil was importedby the governmentand processedat the government-ownedpetroleum refinery. The prima facie reason for the closure of this refinery in January of 1983 was the Government'sinabi- lity to service the oil facility financed by a consortium of foreign banks for crude oil procurement. Since that time the country'srefined product needs have been satisfiedby imports arranged through the former

1/ No accurate estimates of traditionalsector GDP have been available since 1979. However, assuming that this subsectorhas been growing at about the same rate as the population,the cumulativedecline in total GDP becween 1980 and 1982 would be about 3.3% per annum. refinery company and various enclave sector mulcinationals. Oil imports through the Government-owned LPRC are still constrained by a shortage of domestic revenue and foreign exchange. Indeed, in general, the import capacity of the public sector is determined by domestic revenue generation, foreign exchange availability or foreign credit established with overseas banks. As foreign exchange and foreign credit have been constrained over the past four years, there has been extreme difficulty in meeting scheduled oil payments. The deterioration in the public sector domestic financial resources and balance of payments have seriously undermined fiscal viability and overall confidence in the economy.

Indices of Change in the Energy Economy

1.5 The Liberian energy economy has been devolving since th late 1970s if development in this context is defined as an increasing per capita consumption of modern fuels, i.e., petroleum and electricity. Petroleum consumption declined at more than ten times and electricity consumption fourfold the rate of decline in modern sector CDP since the end of the 1970s; in per capita terms the rate of decline is even sharper. However, it is likely that the bulk of the population, the subsistence sector, is relatively little affected by the vicissitudes of the enclave sector and its repercussions for urban-industrial productivity and petroleum supply. There is practically no rural village electrification and the only petroleum consumption for most households is the occasional use of kerosene lamps. In the macroeconomic context, declining petroleum consumption is now being reinforced by declining overall imports and, together with real decreases in unit costs for petroleum products, should ensure that the burden of petroleum import costs on the balance of payments is not further increased.

The Present Pattern of Energy Consumption

1.6 An energy balance for Liberia for 1983 is presented in Annex 1. The gross supply of energy to the economy is estimated at 1.3 million toe, and final consumption after conversion losses at 0.9 million toe. The pattern of final energy consumption is summarized in Table 1.3 below. Biomass fuels comprise 69% of final consumption, compared with 23% for petroleum and 8Z for electricity. Almost 8% of final supply is met with charcoal within the biomass fuel component, and directed almost exclu- siveLy to the urban household market. On a sectoral basis, households dominate consumption albeit comprised largely of woodfuels. Mining and transport consume 10% and 162 of total final energy supply, accounting for the great majority of petroleum consumption outside of electricity generation for public supply, whereas the government, conmercial and estate agriculture sectors consume less than 3% between them. Table 1,1: TREN0S IN GOP AND MOOERNENERGY CONSL'PTION,1976-83

Average Annual Growth 1976 1977 1978 1979 1980 1981 1982 1983 Rate (W)

GOP at factorcost USS million(1971 prices) 357.2 354.2 368.2 384.4 366.2 350.1 328.5 307.1 -2.18 TraditionalGDP econ. 73.5 77.2 77.2 78 S. 80 82.4 / 84.9 / 87.7 a/ 2.56 TotalGOP f.c. (1971prices) 430,7 431,4 445.4 462.4 446,2 432,5 413.4 394.8 -1.25 GOP at CurrentMarket Prices 761.8 872.9 943.7 1067.6 1116.8 1055.4 1063.6 1046,9 4.65 Popeilatlon(1000) 1,632 1,690 1,743 1,810 1,873 1,941 2,012 2,088 3.55 PetroleumConsumption ('000) n.a. n,a. n,a. 602 609 472 438 422 -9,3 Electricity(GWh) b/ 329 339 344 367 364 341 323 308 -0.9 C

Per Capita GOP f.c. (1971USS prices) 263,9 255.3 254.7 255.5 238,2 222.8 205.5 189.1 -4.90 PetroleumConsumption (Kgoe/year) n.a. n.a. n,a. 333 325 243 218 202 -13.31 ElectricityConsumption (kWh/year) 202 201 197 203 194 176 161 148 -4.50 a/ Estimates, ;/ Publicor LEC Supplyonly: Generationminus 15S allowancefor non-technicallosses. Source: Bank staffand missionestimates and GOL. Table 1.2: PETROLEUI IMPORTS, RE-EXPORTS, AND TOTAL MERCJWNDISE TRAME, 1976-82 (million S)

1976 1977 1978 1979 1980 1981 1982

Refined Petroelum Products Crude Oil 53.1 68.7 84.6 103.2 152.1 129,6 94.1

Petroleum Re-exports ------

Not Petroleum Imports 53.1 68,7 84.6 103.2 152.1 129.6 115.1

Total Merchandise Imports CIF 399.2 463.5 480.8 506.5 533.9 477.4 428.4

Non-petroleummerchandise Exports FOB 457.1 447.4 486.4 536.6 600.4 529.4 477.4

Net petroleum imports/ Total lmorts 13.3 14,7 17.6 20.4 28.4 27.1 26.9

Net petroleum Imports/ Total Exports 11.6 15.4 17.4 19.2 25.3 24.5 24.1 a/ Not considering aviation and marine bunkers as re-imports. Source: Economic Survey, 1982, pp. 15,20. Annual Report, National Bank of Liberia, 1982.

Table 1.3: FINAL ENERGY CONSUMPTION, 1983 ('000 toe)

Fuelwood Charcoal Electricity Petroleum Total Share

Mining - - 53.1 44.8 95.3 10.7 Other Industry 4.4 _ 2.8 1.6 8.8 0.9 Transport _ - - 147.6 147.6 16.1 Agriculture - - 1.9 5.7 7.6 0.8 Households 556.2 69.5 9.0 4.5 639.2 69.7 Commerce/Government 12.0 4.2 16,2 1.8

Total 560.6 69,5 78.8 208.4 917.3 - Share (1) 61.1 7.6 8.6 22.7 100.0

Source: Annex 1. -6-

1.7 In a regional context Liberia has one of the most energy intensive economies. Two very crude indices of energy intensity are provided in Table 1.4 for countries in the West African region for which either energy sector assessments have been completed or are underway. These indices compare only the use ot modern fuels with total population and economic production, and they illustrate well the impact of the mining sector on Liberia's energy economy for it is this activity which distin- guishes Liberia from the other countries for which this comparison is made. With resource constraints looming and demand projections showing poor iron and steel prospects, iron ore production in Liberia is certain to decline steadily during the remainder of the century. Therefore, by the mid to late 1990s, the energy intensity of economic production in Liberia will more closely resemble that of the other regionaL economies.

Table 1.4: ENERGY INTENSITIESOF SELECTED REGIONALCOUNTRIES, 1981-82

Consumption of modern Consumptionof modern GOPper Energy forms per Energy forms Capita capita per unit GOP (USS) (toe/1,000 people (toe/millionUSS) per year)

Liberia 520 352 677 Ivory Coast 1,200 155 123 Mali 150 22 153 Upper Volta 250 26 104 Benin 380 33 88 Togo 320 92 288 Senegal 450 66 147

Source: World Bank and missionestimates.

Recent Trends in Power and Petroleum Consumption

1.8 In the first instance, electricity production in the mining sector is about two-thirds of all power generation in Liberia but has been declining rapidly in the past three years. There is an exchange agreement between the public sector supply and the mines which has a minimal net balance but which effectively reduces the mining sectors petroleum-based power consumption during the wet season and reduces the cost of the public system's petroleum supply during the dry season (see Chapter III for details). However, excluding mining sales, demand by the public at large has been declining since 1980 (see Table 1.1 and Annex 14). Within the public supply system almost half of the consumption is by government and commerce and about 40% by households. The contribution of parastatals to commercial demand for el.ectricity is not identified, -7-

though it is undoubtedly significant since air-conditioning is the major load, and these quasi-governmental institutions are numerous and have their offices largely within the Monrovia Power System supply zone. Despite the overall decline in sales, it is likely that government consumption of electricity, directly or indirectly, has grown substantially in line with the growth in Government and parastatal employees since the revolution in 1980. It is also noteworthy that only about half the power generated is paid for, implying that roughly 40Z of power actually delivered is regarded as being free. When taken together, these observations make the progressive decline in electricity generation and sales since 1980 all the more remarkable. The trends in petroleum product consumption year by year over this same period are also indicated in Table 1.5. These data show that the most uniform and sharp decline in consumption occurred in 1981, the year during which fuel oil consumption fell dramatically, reflecting a decline in mining activity. By 1983 the downward trend for fuels commonly used by the general public and business community - gasoline, diesel and kerosene - had bottomed out and a small amount of growth in demand was occurring over a greatly reduced consumption base. This recent positive trend in petroleum fuel consumption may be related to a small resurgence in rubber production in 1983.

Table '.5: RECENTCONSUMPTION TRENDS FOR PETROLEUM AND POWER

Average 1980 1981 1982 1983 1979-83 - Percentage

Power Sales by LEC -0.9 -6.3 -5.3 -4.2 -4.5

Petroleum Product Supply LPG -4*9 -10.3 17.1 -2.4 0.6 Gasol ine -7.0 -14.4 -2.5 -5.3 -8.0 Avgas 0 6.0 -22.6 -2.4 -5.7 Jet fuel -28.9 -11.1 0.9 3.6 -10.9 Kerosene -8.5 -16.1 -31.7 3.6 -16.5 Diesel Oil -13.3 -21.9 -13.5 5.3 -12.8 Fuel Oil 24.3 -26.4 -5.0 -16.9 -8.5

Source: Mission estimates, LPRC, LEC.

1.9 Petroleum end-use in 1983 is provided in Table 1.6. From a sectoral perspective the majority of the petroleum fuels used directly are consumed in transport. Excluding the aviation fuels, 60% of the internal transport fuel consumption is in the form of gasoline for taxis, light utility vehicles and other forms of public transport centered on Monrovia. Mining is responsible for more than 20% of direct petroleum consumption divided equally between diesel and fuel oil. Diesel use in - 8 - mining is mostly for ore extraction and transport, whereas fuel oil is used for drying ore for pelLetisation. However, when petroleum-fueled power production is included, the mines become the dominant end-use sector for petroleum. Almost all the power supply to LANCO, the only other large iron ore mine, comes from this source. Petroleum fuel used in mining has, nevertheless, been declining during the 1980s and is expected to decline further, eventually ceasing in the early to mid-1990s as high grade accessible ore is exhausted. Petroleum is used to generate one-third of the public power supply, and combined with mines and other industry generation, is responsible for consumption of over half of total petroleum imports. During the next decade there is the opportunity to marginally increase the share of indigenous hydropower but there will be no significant displacement of oil-fired power generation by hydropower within the next ten years. The consumption of petroleum fuels in the household, manufacturing and agriculture sectors is less than 6% of the total used directLy. In industry fuel oil, diesel, and some kerosene are used for heat and steam raising. The manufacturing sector does generate electricity with diesel to support its operations during outages on the public power supply grid, and the lost profits and displaced investment capital in ensuring this back-up is sizeable. Upper income households used LPG as a back-up to electricity for cooking. However, since the refinery closed, all LPG has had to be imported at a much higher cost. The sharp increase in price and only intermittent supply has caused consumption to drop. If public power supply becomes reliable the latent demand for LPG will also decline and future imports are likely to be negligible in the context of overall petroleum supply. Kerosene is an important lighting source and is supplied from the Ivory Coast through unrecorded channels as well as through the port of Monrovia. The demand for kerosene lighting is largely outside of the urban economy and appears little influenced by more global economic trends. Petroleum consumption in agriculture is mostly in rubber production, with much smaller quantities in rice, palm oil, cocoa and other cash crops. Rubber prices have improved and the industry is being rapidly revived and expanded in Liberia though with the major rubber factories converting to wood-fired steam plant, there will be little increase in the direct use of petroleum products in the industry outside of transport and power production.

Future Energy Demand

1.10 The prospects for economic growth in Liberia are uncertain, indeed the demand forecasts made by the mission assume that the mining sector will continue to decline and that possibly mining could cease by 1993 unless large investments are undertaken to develop new ore bodies; such investments are unlikely to materialize due to the secularly weak demand for iron ore. Such a prospect would greatly reduce the base and level of economic activity and modify the pattern of energy consumption in future. The energy balance projected for 1993 (Annex 2) is based on the most likely evolution of iron ore production and the respective mines as best forecast by the Bank's industry Department during the course of -9-

the energy assessment mission. The key assumptions are outlined in Annex 17 and are the best estimates that can be made on the basis of avaiLable information on the global steel market. This forecast bears strongly on the demand forecast for electricity and for petroleum products generally, and consequently bears strongly on the scale and nature of energy sector investment during the next ten years. However, because the major consumer in the iron ore sector, BMC, is assumed to remain in production through 1992, assumptions of better prospects for the mining sector do not alter the conclusions materially (BMC's energy demand is five times that of LAMCO; see Table 2.2). It is, therefore, quite important to em- phasize that even with a more optimistic view of enclave sector productivity, little change is implied during the 1980s in the overall energy demand and hence in the sector investment program the mission has devised. Moreover, no account has been taken in the forecast provided, of the potential savings in fuel oil in the Bong Mine through the use of fuelwood (see para. 4.29), which are greater than che entire consumption for the NIOC. Similarly, any success in having consumers pay for electricity consumed will tend to depress demand further and this effect has not been strongly built into the power demand forecast as projected (only 25% of unpaid demand is assumed lost if it must be paid for: Annex 17), and the full impact of this, too, would tend to offset any new demand through better-than-forecast performance in the enclave sector. However, as a result of the changes in the forecast of economic prospects and the sectoral composition of production, major shifts are likely to occur in the fuel mix and the sectoral pattern of consumption over the 1983-84 period, rather than in the aggregate level of energy consumption. The more significant of these are presented in Table 1.7, which is a summary of selected components of the energy balances for 1983 and 1993 provided in Annex 2.

Table 1.6: FINAL CONSLMPTIONOF PETROLEUM PRODUCrS BY SECTOR, 1982 (toe per day)

Gaso- Diesel Fuel Percentage LPG line Avgas Jetfuel Kerosene Oil Oil Total Share

Mining - - - - - 23.0 21.8 44.8 21.5

Other Industry - 1.2 - - 0.2 0.6 0.8 1.6 0.8 Agriculture 1.2 4,5 - 5.7 2.7 Households 0.3 - - - 4.2 - - 4.5 2.2 Transport - 70.2 0.6 30.4 - 46.4 - 147.6 70.8 Comnercial/Government 0.3 - - - 1.0 2.9 - 4.2 2.0 Total 0.6 71.4 0.6 30.4 5.4 77.4 22.6 208.4 - Share (S) 0.3 34.3 0.3 14.6 2.6 37.1 10.8 - 100.0 Power Production - - - - - 54.4 156.1 203.9 50.3 Total 0.6 71.4 0.6 30.4 5,4 131.8 178.7 418.9 - Share (W) 0.1 17.0 0.1 7.3 1.3 31.5 42.7 - 100.0 Note: Excludes Petroleum DeDot Use. Source: Mission estimates, LPRC, LEC. - 10 -

Changing Fuel Mix

1.11 For reasons aLready elaborated above, fuel oil consumption de- clines sharply over the next decade. The decline would be even greater if an increase in fuel oil fired power generation for public power supply were not projected. For the foreseeable future fuel oil is perhaps the cheapest source of power generation to meet dry season demand, and to meet the heat and steam requirements of the manufacturing sector. The demand for diesel oil is projected to decline not only through the reduction in mining activity, but because of the more extensive use of fuel oil displacing it for power generation as the least cost generation options are implemented. However, diesel oil is the prime fuel for the transport of manufactured goods, agriculture and forest products, and the reduction in its demand for ore handling is somewhat tempered by the growing demand for transport generated by recovery in these activities. A slight expansion in hydropower is anticipated which will displace primarily fuel oil, but also diesel oil fired power generation. The greatest expansion in supply of any fuel is that anticipated for charcoal, for which demand is seen to be linked with urbanization, and which will remain cheaper than its competitors - LPG and kerosene - throughout the period. The market for kerosene is small and relatively insensitive to fluctuations in modern sector performance, as kerosene is predominantly used for lighting in rural areas. On balance, the demand for biomass fuels will grow slightly faster than the rate of population growth, and their share of final energy consumption will move from 70% to 80% over the period: a most atypical transition that can be likened to a devolution of the energy economy which in most other developing countries is undergoing a slow but certain transition away from biomass fuels with urbanization and industrialization. The fact that fuelwood resources can sustain this transition, with reasonable management, is in part why the transition is likely to occur but can be regarded, nevertheless, a for- tuitous characteristic of Liberia's natural resource endowment. The decline in consumption forecast for the major petroleum fuels is largely the result of the projected possible closure of some of the iron ore mines. The forecast increase in public power supply of 0.2% p.a. is very low in comparison with aLmost any other developing country, and again reflects the relatively unique circumstance anticipated of losing a major source of wage and salary income in the period. This strong negative impact, and the impact on demand of having more and more consumers experience the true cost of their consumption by being forced to pay their electricity bills, is only counteracted by growing urbanization and the accumulation of minimum need for electricity for Lighting, some cooking and other services.

1.12 Sectoral consumption patterns change with the possible loss of mining and this counteracts any relative growth in transport energy use stimulated by the expansion of economic activity in commercial agriculture and forestry. The share of household energy use increases as discussed above, though also as an outcome of the decLine in energy use in other sectors. The net effect of these sectoral and fuel mix changes is that final energy use per capita shrinks and overall energy use expands - II - at less than the rate of population growth through 1993. How declining oil imports will affect the balance of payments depends, obviously, on the level of export earnings outside of mining, the price of oil, and many other factors that cannot be predicted with any accuracy. However, it is clear that the pressure on forests is going to increase dramatically with the annual consumption of wood fuels growing by over one-third within the decade, and with this demand increasingly concentrated around cities and towns. The consequent need for improved forest and fuelwood resource management is elaborated later in this report.

Table 1.7: SIGNIFICANT FUTURE TRENDS IN ENERGY SUPPLY AND CONSUMPTION

Percentage Change 1983 1993 Per Year

Major EnergyForms or Sources CGross Supply) Puel Oil COrO toe) 185.9 38.9 -16.6 Diesel Oil ('000 toe) 131.9 76.5 -5.6 Firewood ('000 tonnes) 1636.3 2168.7 2.9 Charcoal ('000 tonnes) 97.7 158.9 5.0 Hydropower (GCh) 283.4 305.9 0.8 Fuel Class (Gross Supgly) Electricity (GWh) -' (public supply) 307.7 302.6 -0.2 Petroleum ('000 toe) 407.2 256.8 -4.7 Biomass ('000 twe) 2,488.1 3,558.7 3.6 End-Use Sectors (Final use) Mining 000 toe) 95.3 0.0 n.a. Transport ('000 toe) 147.6 175.2 1.7 Households ('000 toe) 639.4 866.9 3.1 Agriculture ('000 toe) 7.6 11.0 3.8 Overall Energy Consumption (final use) Per caplta per year All Energy forms (kgoe) 438.1 367.9 -1.8 Electricity (LEC Supply; kWh) 147.4 102.4 -3.7 Petroleum (Kgoe) 99.8 66.6 -4.1 Total Energy ('000 toe) 914.7 1091.4 1.8 a/ Generation less 15% for non-technical losses. Source: Annexes 1 and 2.

Energy Pricing

1.13 The prices of petroleum fuels and electricity on the fonrovia Power System (MPS) are for the most part above the economic costs of - 12 - supply. Electricity pricing issues are discussed in detail in Chapter III (paras. 3.28-3.33) though, briefly, the current tariff for the HPS is a uniform 15 cents/kWh, and the estimated LRMC is a little more than 9 cents/kWh for low voltage consumers. Early in 1984 the SRMC for some of the thermal generation was above this tariff level, though measures have been proposed by the mission which would avoid this in the forthcoming dry seasons when thermal power is required at the margin. The main tariff issues for the MPS are financie.1rather than economic and have to do with the rate of retirement of the LEC's short term debt, the size of which depends, in turn, on the extent to which present outstandings have to be regarded as bad debts. The mission has projected LEC's financial performance under certain assumptions and shown that there is adequate scope for quite steep debt service over the next few years providing metering, billing and other reforms are implemented (see para 3.19, and Annex 15). In the GOL's isolated supply systems, revenues provide for less than one-sixth of the SRMC and urgent tariff reform is required prior to any further investment in power supply to these areas. A series of steps towards levying a more realistic cost-based tariff are provided by the mission in Chapter III (para. 3.33). The issues in petroleum pricing are more akin to those in respect of power on the MPS.

1.14 Petroleum prices and costs for supply to Monrovia are provided in Table 1.8. Border prices to bulk and retail consumers are estimated in Annex 3, and the build-up of ex-depot prices from the Liberian Petro- leum Refining Corporation (LPRC) is provided in Annex 4. At the retail level, prices for gasoline and diesel oil are between 2.6 and 3.3 times the economic cost of supply, whereas fuel oil supplied to the manufacturing sector in Monrovia is about 2.3 times economic costs. Prices to concessions, on the other hand, range from being slightly below the border price in the case of fuel oil, to double this level in the case of gasoline. Concession supply includes that to the Liberian Electricity Corpo- ration (LEC) which, in 1984, was evenly balanced between fueL oil and diesel such that, on average, the economic price was being paid. In the future, as fuel oil becomes the dominant source of thermal power supply to the public grid, the transfer price between the LPRC and the LEC should reflect full economic costs. Currently this is a rather academic consideration as the LEC does not pay for the greater part of the oil supplied by the LPRC. Similarly, concession holders, or the multinational companies operating the iron ore, timber and rubber enclaves, are increasingly supplying their own product, especially fuel oil, hence the only concern need be the level of cost recovery by the LPRC for the use of its product handling and storage facilities. The mission examined the charge now levied on the Bong Mine for this purpose ($0.65/bbl) and found it to be a fair reflection of economic costs incurred. A substantial part of the ex-depot price for petroleum products is excise duty and, additionally for gasoLine only, a contribution to a "stabilization fund" established by the GOL to finance the debt built up in the Public Sector through delinquency in payment between government departments and parastatals. The Level of excise tax and the stabilisation fund tax is a matter of fiscal policy about which there is ongoing dialogue between the COL, the IMF and the World Bank. The mission's only observation is that, - 13 - unless the LEC greatly reduces unpaid power consumption, and both it and the LPRC reduce their own excessive operating costs, these fiscal measures will not in themselves be adequate to resolve the cycling public debt problem. Therefore, the mission urges the COL to enforce the measures outlined in the following chapters which are designed to radically cut costs, improve operating efficiency, and increase cash flow to both parastatals.

Table1.8: PETROLEUMPRICES AND COSTS,MONROVIA, LIBERIA, FIRSTQUARTER, 1984 (US dollars)

Ex-depot Retail Concession Estimate Price Price Price EconomicCost ------per US gallon -B- Bulk - Retail

Gasoline (Premium) 2.81 3.00 1.89 0.84 0.90 Kerosene(Power) 2.33 2.55 1.4' 0.85 0.90 OieselOil 2.16 2.35 0.87 0.84 0.90 Fuel Oi1 1.67 n.a. 0.68 0,72 n.a. LiquifiedPetroleum 1.75 2.00 n.a. n,a, n.a. Gas (per kg) (per kg)

Source: Oil Companies,LPRC and missionestimates, Annexes 3 and 4. n.a. = not available/applicable.

1.15 The firewood, fuelwood and charcoal markets are in private hands and there is fair price competition. Some apparent anomalies in woodfuels pricing are discussed in Chapter IV whereby prices for firewood vary considerably across the Monrovia urban area and between Monrovia and its immediate hinterland. However, by and large, the market is operating well and supply of these fuels is efficient. Prospects have also been identified by the mission for reducing the economic cost of woodfuel production and exploitation of the natural forest resource by increasing the information available to entrepreneurs regarding opportunities to gain access to suitable fuelwood, and through offering incentives of credit and other facilities for the use of the least cost resources. - 14 -

II. PETROLEUN

Background

2.1 The main issues in the petroleumsector are concernedwith options for the efficientprocurement of refinedpetroleum products and the fate of the now dormant Liberian refinery. These issues embrace, in turn, the need to resolve seriousfinancial problems threatening the continuity of petroleumsupply and the need to greatly streamlineadminis- trativearrangements for importingand wholesalingpetroleum as part of a wider cost reductionprogram. In order to define a least cost practical solutionto these problemsthe mission reviewed in detail the operations of the LiberianPetroleum Refining Company (LPRC)and examinedthe physi- cal conditionof the refineryand petroleumhandling and storage facilities. Similarly, in order to better understandLiberia's petroleum procurementoptions the missionexamined relevant international petroleum productmarkets in the context of projected local demand. This chapter presents the integrationof these analyses of short and longer term issuesand options in an attempt to define a strategyto reduce the constraint imposed by high petroleumcosts on Liberia's economic development.

PetroleumResources

2.2 There are no known hydrocarbonreserves in Liberia. Potential petroleumresources have been identified in small sedentary basins on- shore and in the extensionof thiLssedimentary sequence offshore. In 1971, four offshore wells were sunk, all of which proved to be dry, though there were hydrocarbonshows in many of the geological sequences drilled. Nevertheless,in line with the interestsof the oil companies concernedin the global oil market -' che day, these concessionswere abandoned. In 1980, the Bank extendeda US$5 million loan to Liberia for petroleumexploration promotion, including a 2,500 km seismic program in the offshoreprospective zone. The outcome of this project has so far been an explorationproduction agreement between the GOL and Amoco Inter- nationalwhich is currentlyundertaking additional seismic work and pre- paring to drill the first of the four exploratorywells to which it is committed. It is obvious that the profileof Liberianenergy policy will change dramaticallyif economic reservesare established,though even if they were discoveredthis year there is unlikely to be an effect on the country'senergy supply prior to the 1990s.

PetroleumProduct Demand

2.3 The most importantfactor determiningLiberia's petroleum con- sumptionpattern is the performanceof the mining sector,which accounted for about 49% of petroleumdemand in 1983. The 30% decline in petroleum - 15 - product consumption since 1980 has been due mainly to reduced iron ore production (Table 2.1). There has been a fall in demand for each product between 1979 and 1983; however, some recovery was experienced in jet fuel and diesel oil demand in 1983 (see Table 1.5). The pattern of petroleum product consumption in Liberia is summarized in Table 2.1. Since 1981, the reduction in petroleum consumption has been in proportion to the decline in GDP, with the energy intensity of the modern sector of the economy remaining virtually sLatic over this period.

Table 2.1: DEVELOPMENT OF PETROLEUM PRODUCTS CONSUMPTION, 1979-83 (Mtoe)

1979 1980 1981 1982 1983

LPG 0.6 0.5 0.5 0.6 0.6 a' Motor GasoLine 97.5 90.7 77.6 75.6 71.7 Aviation Gasoline 0.7 0.7 0.7 0.6 0.6 Kerosene 10.0 9.1 7.7 5.2 5.4 - Jet Fuel 46.0 32.7 29.1 29.3 30.4 Cas Oil b// 212.1 183.0 143.0 123.7 131.9 Fuel Oil b 234.0 289.5 213.0 202.4 180.9

Total -/ 600.9 606.2 471.6 437.4 421.5 a/ Including estimated quantitites of unrecorded consumption. b/ Includes bunkers on historical basis. c/ Includes refinery fuel on historical basis but excludes the use as part of LPRC depot operation. Excludes also minor quantities of naphtha available when refinery operated, but believed to have been mainly exported. Source: Mission estimates, LPRC.

2.4 Projections of Liberia's petroleum requirements over the next ten years have been made on a sectoral basis. These projections are based on a number of major assumptions regarding future economic growth, forecast iron ore production (see Annex 17), and the overall demand for electricity through 1993. The macroeconomic assumptions applied are that population growth will continue to average 3.5% per year, with urbanization of the population proceeding at about 5.8%, the major proportion of which will be concentrated in Monrovia. GDP is projected to increase at 3.2% per year between 1983 and 1985, to decline sharply in 1987, 1988 and 1993, but otherwise to grow at 3.4-3.5% per annum. The mining sector's projected fuel requirements are summarized in Table 2.2. Petroleum product demand in 1993 is expected to be 165 Mte lower than that of 1983. Almost 90% of this decline will be due to the fall in fuel oil demand (Table 2.3). Iron ore production is expected to increase slightLy in 1985, followed by a reduction in output under the scenario applied as - 16 -

mining activity falls off at the NIOC and LAMCO mines. The BMC mine is expected to continue its operationuntiL 1992, requiringabout 103 Mtoe per year toward the end of the period. The forecast for consumptionby fueL type providedin Table 2.3 shows a drastic fall in the proportionof heavy fuel oil, from about 45% to 152 of petroleum consumptionbetween 1988 and 1993, while over the same period gasoline demand climbs from about 21Z to 35%, and middle distillatesincrease from about 31% to 49X of the total. The very sharp decrease in demand projectedfor petroLeum products between 1984 and 1993 greatly influences petroleum supply options.

Supply of Petroleum

2.5 Up to December 1982, most of the country'spetroleum requirements were met by processingimported crude oil at the Monroviarefinery. The refinery,which was built in 1968 by Sun Oil Corporation,had a sustainable throughputof 13,500 barreLs per day. It was operated until 1976, when a major fire disruptedoperations. The GOL bought the refinery from Sun Oil in 1978 and formed the LiberianPetroleum Refining Cor- poration (LPRC) as a public sector corporationto operate the refinery with the technicaland managementassistance of a 15-man expatriateteam provided under a 5-year management contract by Lummus Operating Asso- ciates (LOA) of New Jersey. Since then it has been operated at up to 10,000 bbls/day. In December 1982, the refinerywas closed followingthe collapse of crude oil procurementarrangements (see para. 2.15). At present the LPRC is responsiblefor all aspects of petroleumsupply, with two exceptions:(a) the major concessionsare permitteddirect imports if the LPRC price exceeds the "fair world market prices" and (b) the major distributorsand concessions(iron ore and rubber) are allowed to import productswhen the LPRC is unable to supply their requirements. From the beginning of 1983 alL of Liberia's petroleum product requirementswere met by imports from the spot market. Most purchaseswere made at the last possibLe moment due to inadequateprocurement planning and difficulty in arrangingforeign exchange to establishthe requiredcredit. As a result LPRC was regarded often as a distress buyer and frequentlypaid well above world market prices. Nevertheless,LPRC retainedits virtual monopoly on the import of petroleum products throughoutmost of 1983. Because the LPRC could not adequatelymeet the enclave sector petroLeum demand the companies concernei 1-egan importing products directly, often utilizingtheir own port facilities. The LPRC charges a handlingfee for productsprocured by other companieswhich are received through its port and storage facilities. In November 1983, LPRC's monopoly on product imports was lifted and all end-userswere permittedto import petroleum fuel for their own business operations,although at the same time the LPRC issued a set of guidelines governing the import of products by others which were not conducive to their participation. Less restric- tive guidelineswere subsequentlyagreed to by the GOL but had not been releasedby February,1984. - 17 -

Table 2.2: MINING SECTOR FUEL REQUIREMENTS ('000 toe)

1983 1985 1988 1992

BMC 155.3 161.9 146.6 146.6 LAMCO 30.2 35.2 15.3 - NIOC 10.0 11.0 - -

Total 195.5 208.1 161.9 146.6 a/ This is for total iron ore production of 14.6, 15.5 and 7.5 MMte respectively for the years 1983, 1985, 1988 and 1992. Source: Mission Estimates.

Table 2.3: COUNTRYWIDE PETROLEUM DEMAND FORECAST

----- 1985 ------1988------1993… Mtoe X Mtoe X Mtoe Z

LPG 0.5 0.1 0.3 0.1 0.1 0.1 Gasoline 76.8 18.2 80.9 20.9 89.6 35.0 AvGas 0.7 0.2 0.8 0.2 0.9 0.3 Kerosene 5.8 1.4 6.9 1.8 7.8 3.0 Jet Fuel 30.4 7.2 36.3 9.4 42.4 16.6 Diesel Oil 129.2 30.6 88.4 22.9 76.5 29.9 Fuel Oil 178.8 42.4 172.6 44.6 38.9 15.1

Total toe 422.1 100.0 386.21 100.0 256.2 100.0 bbls/day 7,893 7,227 4,800

Source: Mission Estimates.

Port Facilities

2.6 Existing port and product handling facilities are limited. The products terminal can only accept tankers up to about 30,000 DWT with a draft limitation of 32 feet, and 50,000 DWT on a part-laden basis with an overall length restriction of 700 feet. The existing product jetty is used to receive petroleum products into the Water Front storage tanks (previously owned by Mobil/Texaco), and from there they are transferred via a four mile pipeline to the refinery product tank-farm from where they are shipped to the market by truck. The product jetty is undersized and it has been so damaged by collisions that it is unsafe. There are - 18 - three product lines to and from the terminals to the jetty. Products are usually brought in by multi-compartment tankers of up to 30,000 DWT capacity and unloaded by ship's pumps to the terminal's receiving storage tanks in the Freeport waterfront of Monrovia, not far from the product import jetty. The terminals were under lease to LPRC until mid-1983, when LPRC bought them from Texaco. Following the refinery's closure in December 1982 about 90% of Liberia's petroleum requirements were imported through LPRC's terminal and distribution facilities at the port of Monrovia and the refinery site. The remaining products were purchased and imported directly by LAMCO using its own port and storage facilities at Buchanan. The total product supplies to Liberia in 1983 averaged about 8,000 barrels per day (Annex 5 shows the purchase and sales pattern for major users and sectors).

2.7 Products for retail sale within Liberia leave the refinery by tank trucks. These are filled at a 4-bay loading rack located inside the refinery area. Products supplied to the two major consumers, BMC and LEC, are usually delivered from the terminals by pipeline and by rail- road. There is also a small truck-loading rack at the Texaco terminal which is not currently in use.

2.8 Of the total products handled at LPRC facilities in 1983, only 48% were actually purchased by LPRC, while an additional 44% were purchased directly by BMC and the remainder, consisting of jet fuel, were imported by BP/Mobil and supplied to international airlines. About 70X of LPRC's petroleum product imports were suppLied to private consumers through distribuLor's retail outlets, and 30% were supplied to major consumers, the most significant being the Liberian Electricity Corpora- tion (LEC) which was supplied at 'concession' prices (see Table 1.8). Petroleum product consumption in Liberia is spread fairly evenly throughout the year (Annex 6). Diesel oil and fuel oil off-take requirements are somewhat lower during the rainy season when LEC depends mainly on hydroelectricity. Historical data on the seasonaL pattern of fuel consumption in Liberia are quite adequate for forward planning of product purchases.

Procurement Arrangemer.S

2.9 While LPRC is the principal importer of petroleum products in Liberia, its organizational structure remains that of a refining institution. Indeed, LPRC's management anticipated r'..luming-refining operations until early in 1984, when it began to identify with its new function of importing and wholesaleing refined products. Since refining ceased, no attempt has been made to develop expertise specific to product procurement. During February 1984, the product procurement function was performed by marketing and refinery production managers who had little experience in these functions and lacked the specific knowledge of the international oil industry required to maximize LPRC's purchasing efficiency. For example, LPRC has so far been unable to ensure that its - 19 - potential suppliershave an adequate capital base and are able to meet their commitments. Usually the "lowestbidder" is the only criterion for choice of suppLier and this approach makes LPRC vulnerableto critical dislocation of supplies, particularly since it has to operate with minimum stocks. Moreover, in the event of default or deficientproduct specification,the LPRC is poorly placed to seek adequatecompensation.

Product PurchasingPerformance

2.10 The LPRC procuresga.;oline and diesel oil at intervalsof about a month. The gasoline requirementis around 5,000 tonnes per month throughout the year, whereas diesel oil consumptionis 10,000 te/month during the dry season and half of this during the wet season (June- November). Fuel oil is procured in amounts varying between 5,000 and 10,000 tonnes under separate tendersas the need arises. Jet fuel and kerosene is purchased in 2,000 tonne parcels in monthly tenders along with the gasolineand diesel oil. The mission reviewed all LPRC's 1983 product purchases for its own account which included60.5 Mte gasoline, 79.1 Mte diesel oil, 18.1 Mte fuel oil and 5.7 Mte jet/kerosene,cotal- ling 163.4 Mte. The LPRC oDerate-on an extremely tight time schedule, allowing potentialsuppliers only one week to respond to its invitations to tender. This limits the ability of suppliers to offer reasonable prices for they usually experiencedifficulty in locatingcomparatively smaLl quantitiesof productwhich meet Liberianspecifications, in particular, high sulphurdiesel oil (1.0% maximum)and high lead content motor gasoLine (2.91 gns/US gallon). The short lead time for procurementalso prevents suppliersfrom optimizingshipping schedulesby combiningmove- ments to two or more locationsin West Africa to reducethe high freight premia which result from part cargoes deLivered to Liberia. The refer- ence prices appliedhere for productsdelivered to Monroviaare the week- ly averages of the main Platts spot market quotationsfor Rotterdam and Mediterraneancargoes two to three weeks prior ro discharge. Freight costs for product shipments from these markets are based on prevailing spot market tankerrates for vesselsof around 30/35,000DWT, the predom- inant tanker sizes used for product shipmentsto Monrovia. In addition, due weight is given to the fact that LPRC can accept only part cargoes in vessels of this size and freight premia of up to 20% (US$2/tonne)above the spot market level were added for a single port discharge. A comparison of the prices actually paid by LPRC for its main product purchases in 1983 is suunmarizedin Table 2.4 below (detaileddata are supplied in Annex 7).

2.11 It can be seen that in 1983, for most of its purchasesof gasoline (94Z) and gas oil (98%), LPRC paid premia which averaged $14 to $15 per tonne above the level of the internationalspot market, while for 6% of its gasoLine and 2% of its diesel oil purchases,LPRC paid extraordinary premia of $276/tonneand $333/tonne,respectively. In 1983, the average premium paid by LPRC was about $30/tonne for gasoline and $22/tonnefor diesel oil. The cost to Liberia of inefficientprocurement of gasoline and diesel oil was about US$3.6 million in 1983. It is no- table that the purchasingperformance of LPRC showed a marked improvement - 20 -

through the year. If the local distress purchases are excluded, the average premium paid by LPRC falls from almost $30/tonne for both gasoline and diesel oil in the first quarter to $6-7/tonne by the third quarter of 1983. Moreover, LPRC was able to obtain diesel oil in the fourth quarter on a single cargo price estimated at $6/tonne below the assessed international C&F price.

Table 2.4: PREMIA PAID BY LPRC ON 1983 IMPORTS

Motor Gasoline Gas Oil Metric Tonnes Average Premia Metric Tonnes Average Premia ($/tonnes) ($1tonnes) Main Purchases First Q 1983 11,106 29.4 29,540 29.8 Second Q 1983 19,504 15.4 19,443 10.0

Third Q 1983 15,417 7.2 19,418 5.8 Fourth Q 1983 10,842 6.2 8,929 (6.0) bi Subtotal 56,869 14.1 77,330 14.7 Local Purchases a/ First Q 1983 2,183 424.1 1,814 333.0

Fourth Q 1983 1,485 56.0 -

TotaL Year 1983 60,537 30.0 79,144 22.0 a/ Small parcels each of around 1,000 tonnes shipped from Freetown (Sierra Leone) and Abidjan (Ivory Coast). b/ Represents a discount on the assessed C&F international price.

Other Components of the Landed Price

2.12 In addition to the C&F costs, LPRC incurs a number of other costs in landing product. These are summarized in Table 2.5 and amount to US$16-20 per tonne, or the equivalent of about 7% of the C&F cost. Certain of these costs are imposed by the government, for example, the National Port Authority (NPA) and consular fees, and are somewhat unique to Liberia. Those costs, which are generally incurred in the oil industry, include cargo insurance, cargo inspection fees, cargo losses, and appear to be in broad alignment with international market levels. How- ever, demurrage costs couLd be reduced with better procurement planning and more efficient operational practices, and the cost for Letters of Credit (LC) are substantially higher than oil industry experience and, in fact, higher than LC cost for other commodities imported in Liberia. With the exception of demurrage and cargo losses, most of the other purchasing experses do not require foreign exchange. - 21 -

Table 2.5: LPRC's OTHER PURCHASING COSTS (S/tonne)

Gasoline Cas Oil

Cargo Insurance a/ 0.58 0.48 Letter of Credit bI 11.25 9.38 NPA Fees - Whar age c/ 1.30 1.30 Consular Fees d 4.51 3.76 Cargo Inspectfgn Fees e 0.08 0.08 Cargo Lossea _ 1.10 0.91 Demurrage A 0.40 0.40 Total 19.22 16.31

at 0.175Z of 110% of the C&F cost. The reason the C&F value is increased by 10% for the calculation of the cargo insurance is unclear. b/ 3.75% of the C&F cost. cl Wharfage charge paid to the National Port Authority for the use of a facility in reception and delivery of cargo. d/ 1.5Z if the C&F cost payable as a tax to the government but in practice offset against payments outstanding on government oil purchases from LPRC. el A rate of 8 cents/tonne paid to cargo surveyors at Monrovia. ./ At the loss factor of 0.365X of the C&F cost as agreed between LPRC and the "concessionary companies." tI Costs arising through failure to receive cargo within agreed laytime at the average amount incurred by LPRC during first half 1983.

Final Cost of Petroleum Supply at the Depot

2.13 Although the costs of petroleum landed at the port are already considerably higher than expected because of higher than necessary FOB prices, shipment costs, LC costs, and all handling charges indexed to the landed price combined only add about 13 cents per gallon, or US$43 per tonne, to the final cost whereas the LPRC estimates the total of its other costs (including its "direct/indirect" costs category) to be 40 cents per US gallon, or $132 per metric tonne weighted average over and above the CIF price for 1983 purchases. These costs are extraordinary by international standards, so the mission devoted considerable effort during fieldwork reviewing LPRC's accounts to better understand the origin of these costs and determine a fair cost to undertake this business in Liberia. The results of this review are summarized in Table 2.6 below. - 22 -

Table 2.6: SIMPLIFIED COMPARISON OF COSTS OF PETROLEUM PROOUCTS IMPORT AND SUPPLY BEFORE AND AFTER PROPOSED REFORMS, BASED ON 1983 IMPORTVOLUMES

Total Landed Cost Other Costs Depot Total Cost Per (C&F) To Import Costs Average tonne Million US dollars D- -- - MSS --

Estimates of Actual Costs:

As reviewed by mission 46.0 2.8 10.5 59.3 363

As estimated by LPRC 46.0 -- 20.9--- 66.9 409

Estimate of Costs followingProposed Reforms 42.3 1.8 2.5 46.6 285

Source: LPRC and mission estimates.

The LPRC accounts are in some disarray so that the data presented here can only be rega&ded as indicative. However, the contrastwhich emerges between the costs of the presentoperation and those which should legiti- mately be experiencedin receiving,storing and deliveringproduct to the truck loading rack is dramatic. In order to make this cost comparison the 1983 LPRC purchasesof 163,400tonnes of productwith the same mix of fuels was taken in both cases and it was assumed for the reform case that: (a) product was landed at estimated internationalprices; (b) LC charges were 2% of CaF costs; and (c) aLl the proposed reductions in staff and other cost centers outlined in the chapter were made. The minimum saving to accrue from these measures is almost US$13 million per year though this figure is derived from extrapolationof the July statement of accounts,which was the only set of monthly accountsavailable to the mission. The LPRC's estimate of their costs computes to a much higher savings potentialof about US$20 million per year. The difference between these estimates is less important than the fact that, even in comparisonwith the Government'srecurrent budget, substantialsavings are to be made from reform of petroleumsupply and handlingarrangements. Although some of the sources of savings have been discussed,or will be pursued in the remainder of this chapter, it is clear that the major source of unnecessarycosts is the continuedoperation of the refinery in every way except actuallyrefining crude. A full refinerystaff, including shift workers, is still employed and many services are provided to support them, includingtransportation and a range of consumables. In- deed, refinery staff have been actively engaged in the installationof - 23 - new heat exchangeequipment, a crude desalterand pumps. Recommendations regardingthe closureof these cost centres are made in the conclusionto those sectionsdealing with the future of the refineryand future institutionalarrangements (see paras. 2.26 and 2.27).

Short Term Measures

2.14 Some of the problems encounteredin procurementof petroleum products can be resolvedquickly. The mission recommendsthe following measures, preferablythrough the aegis of a managementservices contract (see para 2.21).

(a) employmentof an internationalpurchasing expert with active trading experience in internationalpetroleum product markets in the Atlantic Basin area and, if possible,with knowledgeof the logisticsof suppLy to West Africa;

(b) employment of an accountant and financial specialist in the field of petroleum product procurementand distributionwhose main task would be to completeLyrevise the LPRC financialand productaccounting system;

(i) potentialsuppliers should be notified of Liberia'srequire- ments at least six weeks in advance of scheduled delivery dates. In order not to pre-emptpurchasing options for the longer term, term purchases should be for three to six months and would have to be availableat a discount to spot prices;

(ii) prospectiveoil suppliers should be limited to those with establishedBona Fides, offering satisfactorybank guaran- tees, includingmajor oil companies,refineries, state-owned suppliers of oil exporting countries, and reputable oil tradersand brokers. Large refineriesin West Africa should also be considered.

Financingof PetroleumImports

2.15 From March 1979 until the refinery closed, LPRC importedcrude oil from Saudi Arabia under a term contractwith Petromin. These imports were financed by a revolving letter of credit facility arranged by the National Housing and Savings Bank of Liberia (NHSBL) in associationwith a syndicate of 25 internationalbanks. The facility,originally for a maximum of US$75 million,was reducedin 1981 to US$50 millionand closed in mid 1982 because NHSBL was unable to accomplish a US$10 million scheduled repayment on behalf of LPRC due to a lack of offshore - 24 - reserves. The termrsupplycontract with Petrominwas subsequentlysus- pended, and during the remainder of 1982 LPRC bought three cargoes of crude oil on the spot market before switchingat the end of 1982 to importing refined products. CurrentlyLPRC's books indicateUS$26 million outstanding to the syndicate.

2.16 During the first half of 1983 LPRC arranged oil purchases without secured credit financing -- a factor which contributed to the high cost of product imports. A new arrangement for financing oil purchases was introduced in mid-1983 through Citibank, which was rot involved in the previous syndicate facility. Citibank provides secured credit financingfor the majority of LPRC's oil imports,and in return has sole access to 5% of the foreignexchange earnings of the iron ore producers. In addition to the provisionsof confirmed irrevocableLC's, Citibank requests of LPRC 100% cash collateralin local funds on the date that LC is opened, and charges for the LC a fee of 3.75% which, on average, has amounted to an additionalcost of $10/tonnefor importedproducts. It is noteworthy that LC costs for international oil purchases are normally between 0.025% and 0.25% of the C&F cost depending on the status of the purchaser, though a premium can be anticipated for countries experiencing shortages of foreign exchange. Given the dedication of the considerable foreign exchange resources by GOL to Citibank, and the above mentioned collateral arrangements, there is a prima facie case for renegotiation of LC charges to a much lower proportion of C&F costs.

2.17 While the Citibank arrangement has significantly improved LPRC's financial credibility as an oil buyer in the international market, its financiaL situation is still deteriorating, and measures to reduce costs and improve liquidity are urgently required. Indeed, during the 1984 dry season, when LEC's demand for oil-fired power generation was at its peak and LEC was unable to pay fully for its oil off-takes, poor liquidity became the LPRC's most pressing problem for it was unable to provide the local funds necessary to procure products in the required shipment size. This problem necessarily preoccupies the LPRC management and has a debilitating effect on the institution's performance. Aside from the unusually high operating costs, premia, and the other charges noted above, LPRC frequently encounters probLems of default and long term creditors, and has accounts receivable of between US$50-$70 million, of which 50% and 30% is owed by LEC and the Government, respectively, and the remaining 20% is owed by 33 private wholesalers.

Distribution Costs

2.18 Currently the transport of products from the refinery gate to retail distributors is carried out by the Liberian private sector. The retail distribution at pump stations is also in private hands. Both functions appear to be performed crudely but efficiently. The transport and distribution charges are 10.5% above the wholesale price for the Monrovia region and as high as 16% of the refinery gate price in the more remote parts of the country. Since this is normally the most cumbersome part of product supply, requiring efficient administration, the mission - 25 -

is impressed that the business is being conducted so well and hence sees no reason for change.

Private Sector Role in Product Supply

2.19 From 1968, when the refinery was built, until 1983, the refinery operator, whether Sun Oil or LPRC, has had a monopoly on oil import, refining, and wholesaling. In November 1983, guidelines were issued which permitted any major consumer to import for their own use. Presently all the product storage facilities in Monrovia are owned by LPRC, with the exception of the BMC 48 Mbbl fuel oil tank, and the downstream distribution outlets are also privately owned. Therefore, for the private sector to conduct the petroleum procurement and distribution business on its own terms without the use of LPRC facilities would require substantial investment. With the possible exception of Mobil, which retains distribution outlets in Liberia, there appears to be Little interest among oil companies to invest in product storage and handling facilities locally. Indeed, the majors have been divesting themselves of any significant petroleum supply facilities in Liberia in recent years. BP and Agip are selling their distribution systems to Mobil which has already consolidated its retail outlets to a few key sites in Monrovia. Shell is selling its distribution system to Petro Chemical Industries (PCI), a parastatal, and Texaco is reportedly discussing the sale of its distribution facilities to LPRC. The prevalent view among international oil companies appears to be that any renewed capital investment in Liberia in the area of petroleum import and distribution would be limited to small amounts for which they would be assured a quick and guaranteed payback. For example, one oil company representative in Monrovia indicated interest on behalf of his company for widespread involvement in the subsector in return for monopoly control and a government guaranteed profit margin. Moreover, the limited size of the Liberian market is likely to constitute a major deterrent for the state-owned entities of those oil exporting countries which may be prepared to consider foreign downstream ventures, if only because of their own limited availability of experienced personnel. In addition, private oil companies are unlikely to be interested in fuel oil transactions limited to the mining companies and the Liberian Electricity Corporation. Therefore, the prospects for new private sector investment in petroleum supply facilities are limited.

2.20 Nevertheless, private sector participation in product procurement and depot management is conceivable and would have a number of immediate benefits, such as reduction in premia, lower LC costs, increased security of supply, the establishment of sound financial management practices, and the provision of urgently needed expertise. The savings anticipated from the reduced premia and LC costs alone are estimated to at least US$3.6 million and US$0.9 million per year, respectively. There- fore, the mission regards private sector participation in petroleum procurement and depot management as vital and urges the COL to give the matter very high priority. - 26 -

Options for Private Sector Involvement

2.21 Various options exist for invoLvement of the private sector in Liberia's petroleum industry. These range from long term (3-5 year) monopoly concession to short term service contracts under which experts are provided to the LPRC (or its successor) to perform specific functions. In line with the mission's recommendation that the LPRC be dissolved and replaced by a new Liberian Petroleum Supply Company, it seems appropriate, as a first step, to invite tenders for a management contract from oil companies or other firms with the necessary experience in international product purchasing and supply. In the short term it is prefer- able to give considerable authority to the contractor as the reforms required are sweeping and the benefit to the country of a rapid transition is substantial. The present management of the LPRC is both encum- bered by the legacy of litigation and poor financial management of the refinery and inexperienced in the business of product procurement and depot management. However, arrangements should be made to protect the careers of current dedicated top managers at the LPRC and to ensure that a transition is made to Liberian management by the end of the management services contract. The present top managers can also play an important role in liquidation proceedings for the LPRC as well as working closely with the management team gaining the experience to manage the new supply company. Thus, the management services contract should also include provision for specialized training and on-the-job experience in similar operations elsewhere. The advantages of such a management contract include:

(a) the use of tried and efficient operating procedures based on experience and similar conditions in other parts of the world as well as West Africa;

(b) continuity of sound management practices which can be maintained irrespective of changes in key personnel; and

The cost of a management contract is obviously dependant on its precise structure and the number of staff to be provided. It is proposed that the team be composed initially of three persons, one acting as General Manager, one as procurement specialist, and one as financial manager. The rost is estimated to be a maximum of $600,000 per year. This arrangement can only be effective if it has adequate support at the very highest levels of Government.

Product Storage Capacity

2.22 Even though there is ample oil storage capacity in Monrovia this is not all suitabLe for refined products. In the refinery area - 27 - there are 26 storage tanks with combined capacity of 400 Mbbls (Annex 8). Most of this refinery tankage is co store crude oil (3 tanks = 247 Mbbls) whiLe the remainder (123,000Mbbls) is designed to store refined products. In addition to the refinery storage, there are 15 storage tanks with a combinedcapacity of 319 Mbbls in the Mobil/Texacoterminals near the import jetty at Water Front (see Table 2.7). Considering Liheria's refined product needs it is clear that the present configura- tion and locationof storagetanks imposesserious limitationson LPRC's capacity to conductan efficientsupply operation.

Table 2.7: LPRC REFINED PETROLEUMPRODUCT STORAGE CAPACITY, 1984

Terminal Refinery Total (Mbbls) (Mte) (Mbbls) (Mte) (Mbbls) (Mte)

Gasoline 43 5 33 4 76 9 Jet Fuel/Kerosene 24 3 25 3 49 6 Gas Oil 68 9 25 3 93 12 Fuel Oil 184 28 40 6 224 34

Total 319 45 123 16 442 61

Source: Missionestimates, LPRC.

2.23 To remedy this situationand, in the process,to facilitatethe transitionto a new and efficientLiberian Petroleum Supply Company, the mission recommendsthe transferof aLl storageand supplyoperations from the refineryyard, four miles away, to the Water Front port area. Fortu- nately, considerableinfrastructure is already in place there and some of the vacant land is owned by the LPRC. To implementthis proposal the followingchanges are required.

(a) modify the crude jetty and rehabilitatethe productjetty;

(b) convert the two existing 180' diameter crude tanks to product storage, receiving products direct from unloading facilities, and construct five new product storage tanks to increase the capacity by 13G,000 bbls.

(d) instalL a new truck loading rack on the vacant land south of the existingcrude tanks.

The cost ot this construction is estimated to be US$7.5 million. It is justified, in part, by savings in operating costs, reduction in product - 28 -

losses, fewer demurrage penalties, and increased security of supply. The potential savings from reduced product losses alone could be US$2.3 million annually based on a 75Z reduction to 1% from the present 4Z loss of product landed. The operating costs reduction is estimated to be about US$2 million. Apart from the US$4.3 million potential savings per year, it is clear from the present condition of the equipment that some major expenditures will have to be undertaken in order to maintain the import flow.

Parcel Size Limitations

2.24 The parcel size in which products are delivered is effectively limited to 5,000-10,000tonnes by the storage capacity at the terminal because of the time required to allow the product to settle in the tank to facilitate cargo measurement, and by limited pumping capacity to transfer products by pipeline from the receiving terminal to the refinery four miles away. These limitations on parcel sizes have implications for purchase costs and would be alleviated by the proposed terminal storage investments. LPRC should seek to maximize the parcel size of deliveries in order to optimize purchase prices and freight costs. To achieve this objective at present, stocks at the terminal have to be rundown to virtually zero on the day of reception. On these occasions, stocks are limited to those which can be held at the refinery.

Prospects for Oil Refining in Liberia

2.25 To evaluate the economics of refining in Liberia, various crudes, products, and freight cost forecasts were considered (see Annex 9). It is concLuded that with continuing surpluses of refining capacity in the OPEC and Atlantic areas refinery margins and processing fees will remain low. Even though there might be an increase in these costs of about $1.10/bbl between 1983 and 1990, which would provide an additionaL margin of US$2.2 million per year to the Monrovia refinery, based on Liberia's anticipated product mix this will not lead to profitable refining in Liberia for which the estimated loss is over US$5 million per year. The data provided indicate that international refinery margins would have to increase from $2.68/bbl to $4.40/bbl by 1993 for the Liberian refinery just to break even. In addition, the mission estimates the cost to re-commission the refinery -- with essential efficiency upgrading included - as US$11 million exclusive of crude stocks. In the present fiscal climate this capital requirement is prohibitive even if an optimistic view were allowed of future operating costs and margins. Thus, on the basis of the present outlook, and Liberia's rapidly declining Liquid fuel demand, the mission sees no prospect for a viable refining operation in Liberia within the next 10 years, and strongly endorses the GOL's decision to permanently close the Monrovia refinery. This raises the question of the future of the refinery facilities. Two options exist: mothballing or dismantling. Since mothballing the facility and reactivating it after 10 years is estimated to cost as much as - 29 -

US$21 million (see details in Annex 10) with no apparent prospect of a return on the investment,while scrapping will generate about US$1.5 million cash within the next year, the mission recommends that the refinery be dismantledforthwith. Care should be taken to maximize the returns on salable assets such as new equipmentand vehicles by placing them in storage or otherwisepreserving and protectingthem pending their sale. The liquidationof refineryassets should be coordinatedwith the transfer of operations to the Water Front location,and the transformation of the LPRC to a petroleumsupply companyas discussedbelow.

InstitutionaLIssues and Options

2.26 The mission's review of the managementof the petroleumsubsector has led to the recommendationsin para. 2.21 from which it is evident that major restructuringis requiredof the corporatevehicle for petroleumsupply. Being establishedonly to importand refine crude oil, the LPRC lacks both the orientationand the expertise to manage its new functions as a product importer. Moreover, it is burdened by serious overstaffing,with a payroll exceeding480 people. Making due allowance for Liberian conditions the staff required for present operations are about 120 and with the refinerydismantled should not exceed 85. Similar operations elsewhere employ about 50 people. An outline of present staffing and the mission's estimatesof future staffing requirementsis providedin Annex 11. In addition,there is a legacy of many complicated legal and financialproblems related to the previous refining activities which preoccupiesthe LPRC managementand limits their capacity to deal with their present day-to-day responsibilities. It is in view of the above, and in line with previous recommendationsthat the mission recommends major institutionalrestructuring of the petroleumsubsector by:

(a) liquidatingthe LPRC, clarifying its objectives,debtors and creditors, and appointing a commissioner to finalize its affairs in the best interestsof the State.

(b) Forming a Liberian Petroleum Supply Company (LPSC), with objectives,legal framework,administrative structures and staff appropriateto the efficient procurementand supply of refined petroleum products. The management of this company should be vested with the management contractorsproposed eLsewhere who would also be responsiblefor establishingthe new legal and corporate entity, and effecting an orderly transition to it from the LPRC.

2.27 As an immediatestep in the directionoutlined here the mission recommendsa series of cost reductionmeasures which were also outlined in an aide-memoireleft with the GOL at the time of the assessmentmis- sion. These include: - 30 -

(a) reduction in LPRC staff from '30 to 120 with a further reduction to a maximum of 85 as the refinery is dismantled;

(b) reduction in other major and unnecessary cost centres such as staff vehicles and hired buses.

Petroleum Investment and Technical Assistance Requirements

2.28 The mission's recommendation regarding the transfer of o'era- tions to the Water Front terminal locati.n and the establishment of a management contract for petroleum supply requires a total investment of about US$10 million between 1984 and 1987. More precise information on the cost of refurbishing and upgrading petroleum handling and storage facilities will be generated by the required engineering design and costing studies, whereas the precise cost of the management contract, and the expertise included, will not be known until final bids are negotiated. The foreign exchange component of the investment program outlined in Table 2.8 is estimated to be between 70-80X. There is no doubt that the LPRC, or its successor, can substantially finance the investment program with surpluses generated by efficient operation under the existing petroleum price structure. The proposed management contract should quickly transform the present precarious financial situation of the LPRC into one of significant resource generation with the important proviso that, simuLtaneously, the LEC and other government and parastatal consumers begin to pay in full at the time of billing.

Table 2.8: PETROLEUMSECTOR INVESTMENTPROCRAM ('000 US$)

1984 1985 1986 1987 Total

1. Management Contract (including procurement and accounting expertise) 80 600 600 600a/ 1,880 2. Capital Investment Engineering design and cost studies 200 200 Construction and Rehabilitation of Free Port Terminal and Jetties 1,270 3,750 2,480 7,500 Total 80 1,890 4,350 3,080 9,580 a/ Three years in first instance, extended for five years in all. Source: Mission estimates. - 31 -

III. ELECTUICITY

Introduction

3.1 Liberia has abundant power resources in the form of hydropower and biomasp and it is conceivable that petroleum exploration now in pro- gress may add to the existing choices. However, the main issues in the power sector have more to do with the sustained financial viability of the power utility and its technical capability to serve the present demand than with the choice between major new indigenous power resources. Of course, there are choices to be made regarding the scale, timing and source of new generation, and these are addressed fully here, but the sense of urgency that necessarily applies to resolving the power utility's impending financial crisis, and to alleviating persistent and prolonged power outages in the dry season, relegates medium and longer term issues to a lower priority. Consequently this chapter analyses day- to-day administrative and operational problems at some length. Problems of unpaid use of power, non-payment of bills rendered, and inadequate metering and billing procedures and accounting have been studied and crash programs of rehabilitation proposed. It has been necessary, in any case, to understand these problems fully as the demand for power in Liberia is highly elastic due to the large number of consumers who either do not pay at all, or who are billed for less than their actual consumption. Load forecasts derived with this in mind are quite different from those projecting demand based on historical trends in generation. Hence the elaboration of short term issues and options sets the framework for evaluation of medium to long term choices regarding transmission and distribution design and development, electricity pricing, co-operation with the enclave sector, and generation expansion planning.

Institutional Arrangements

3.2 Electricity is generated under the authority of the Liberian Electricity Corporation (LECJ - a statutory corporation in which the Government of Liberia is the sole shareholder. The corporation was established by legislation in July, 1973, as a subsidiary of the Public Utilities Authority, but became autonomous when the Authority was dissolved in February, 1976. There is no legislation relating to the LEC of the type normally associated with a public utility whereby purpose, functions, rights, obligations and service standards are defined. The absence of a clear right under law for the LEC to penalise for misappro- priation of its goods and services has proven to be a significant deficiency. The LEC is nominally responsible for public electricity supply throughout Liberia, though the great majority of its staff and other resources are dedicated to the Monrovia Power System (MPS). There are nine small isolated power systems operated for the government by an organization loosely integrated with the LEC in that it occupies the same - 32 - premises and reports ultimately to the General Manager of the LEC. How- ever, its budget is supplied directly by government and its staff, including all technical personnel, are government employees. The LEC does not charge an overhead fee to the government for the use of its premises and management services, There is also a substantial self-contained generation capacity operated by the enclave sector and many small private industries, businesses and the like maintain their own generation facilities either as a back-up to public supply or as their main power source. Finally, there is an important power exchange agreement between the Bong Mining Company and the LEC which will be discussed below.

The Power System

3.3 The population served by public power supply is estimated to be about 150,000, or about AZ of the popuLation, whereas the population re- siding within supply areas is of the order of 400,000. Average per capita consumption in 1983 was about 148 kWh/person which is high by regional standards. The distribution of installed capacity by type is provided in Table 3.1. LEC has almost half the total installed generating capacity, including 94% of the hydropower capacity in Liberia. The mining sector has 43% of the installed capacity, other major industries 4Z, and the COL's rural system represents 4% of the total. The schedule of LEC's generating pLant is provided in Annex 12, and that for the isolated rural systems in Annex 13. Hydropower comprises only 18% of generating capacity, which is dominated by fuel oil-fired low speed (150- 160 rpm) diesels. The main power plants are marked on the accompanying map, which indicates that power supply is concentrated in the south- western coastal zone. Actual power production data are not available for all of the enclave sector and from private generation. Moreover, the data gathered for selected companies and activities are limited to recent years. An estimate of total power generation in 1983 is provided in Table 3.2. Approximately 1,040 CWh were produced in 1983, with the mining sector contributing 60%, LEC about 35% and the small public isolated systems and other private sources generating about 3Z each. Hydropower comprised 26%, and heavy fuel oil generation 65% of the total, with gas turbines and medium and high speed diesels producing about 5X each. Liberia is one of the few countries in the world where low speed diesels operating on fuel oil supply the majority of electricity generated. Historical trends in generation are available only for the main grid. These data are presented for 1970 through 1983 in Annex 14, and a summary is provided in Tible 3.3. Whereas generation for the main power system has grown at a rate of 2.1% since 1970, sales have grown by only 1.2% per arnum. This reflects perhaps the most serious problem facing the Liberian public power system: steadily growing and now extraordinarily high losses. Since 1970, losses as a proportion of total generation have grown at about 5% per year, and are reported in two ways in Table 3.3; as a proportion of total generation, and as an estimate of the losses on the system excluding the component of supply made at high voltage to the BMC, which is the estimated loss on the pubLic power - 33 -

system (referred to as 'real' losses). LEC's generation has fallen steadily since 1979 at an average rate of 4.5% per annum, and overall supply to the Monrovia Power System (MPS) has declined by 1.8% per annum. Throughout this period real losses have remained at an average of 35Z of generation. Similarly, sales to the public have fallen by 1.7% per annum presumably under the influence of the changing political circumstances in 1980 and the global recession following the 1979/80 oil price rises. On the other hand, sales to the Bong Nine, though only lOZ of generation, have increased by over 12Z from the beginning of the period. The decline in saLes is surprising considering that so many people do not pay for their electricity and it can only be concluded that the cost of using more power, i.e., the cost of additional appliances and lights, is a significant deterrent for most of the consumers concerned. The table also indicates that BMC has supplied power to the grid since 1981, and that this supply had increased five-fold by 1983. This supply is the result of an exchange agreement between LEC and BMC in April 1981 in terms of which for every 1.3 units LEC supplies BMC -- with output surplus to LEC's requirements in the wet season - BMC supplies LEC 1.0 units in the dry season. This agreement is highly desirable to both parties and has been successfully operated to date. The possible expansion of this co-operation is discussed below as one alternative in meeting future demand on the MPS (see para 3.22).

Table 3.1: INSTALLED CAPACITYOF ELECTRICAL GENERATINGPLANT IN LIBERIA, 1983 (MW)

Hydro- Diesel oil-fired plant Fuel-oil Fired power Gas Turbines Diesel Diesel Plant Total I

I, Public Power Systeus LEC 64.0 68.4 12.3 42.0 186.7 49 GOL Isolated GeneratingSystems 16.5 al 16.5 4

II. Private Power Systems (a) Mining Sector BMC g5*0 LAMCO 63.0 NIOC 8.0 - Subtotal 166,0 43

(b) Refinery (LPRC) 2.4 (c) Firestone Rubber 4.0 2.0 (d) Other 8.0Ž' Subtotal 16.4 4

Total 68.0 68.4 41.2 208.0 385.6 Percent 17.6 17.7 10.7 54.0 100 a/ 4.5 MW not yet in service but included here. b6 Estimates based on mission and ORNLlUGOLopServations Source: Mission observations and ORNI/GOL assessment. Table 3.2: ESTIMATEDPOWER GENERATIONIN LIBERIA,1983 (GWh)

Dlesel-ollFired Plant Fuel-oilFired Plant Hydro- Gas- Medlumto High Speed Low-Speed PublicPower Systems power Turbines DieselEngines DieselEngines Total Percent

LEC 262,3 47.0 5.5 47.2 362,0 34,8 GOL Isolat2V Generating Systems- 26.9 26,9 2,6

PrivatePower Systems MiningJector BM bt S02,1 LAMCOco 98,7 - NIOC cl 17.5

Subtotal 618.3 59,5

Refineryd 3.2 FlrestgqeRubber 19,6 2,4 Other- 7.0

Subtotal 32,2 3,1

Total 281,9 47,0 45.0 665.5 1039.4 Percent 27.1 4.5 4.3 - 64.1 100.0 a/ Estimatesare for 1982-83. i/ Extrapolatedfrom actualrecords for Jan-Sept,1983, Note that 3 GWh of this productionIs with dleseloil as part of normalstart-up operations. cl Based on LPRC 1983 Importrecords and personalcommunicatlon with LAMCO. Note that 37.9 GWh of LAMCO,and possiblyall of NIOC generatlonwas to be producedwith diesel ratherthan fueloll In 1983,and Is taken up In this way In the energy balance(Annex 1). d/ Assumedat 10% plant factoron total Installedcapacity. I/ The proportionof power generationwhich was produced from diesel oll In low speed engines as opposedto medium/highspeed diesel engines Is 105. Source; MissionReview and ORNL/GOLenergy assessment. - 35 -

Table 3.3: GENERATION AND SALES FOR THE MOLOVIA POWER SYSTEM, 1979-83, (GVh)

1979 1980 1981 1982 1983 Percent

Generation - by LEC 432.0 428.0 401.0 380.0 362.0 -4.5 - From Bong Mine 7.0 32.1 39.5

Total 432.0 428.0 408.0 412.1 401.5 -1.8

Sales - Excluding to Bong Mine 254.0 263.0 247.0 241.0 237.0 -1.7

- To Bong Mine 32.1 31.5 25.3 34.1 36.7 3.4

Total 286.1 294.5 272.3 275.1 273.7 -1.1

Losses - Total System 145.9 133.5 135.7 137.0 127.8 Percent of Generation (S) 33.8 31.2 33.3 33.2 31.8

- PublicPower System Component a/ 144.3 131.9 134.4 133.8 124.1 Percent of Public Power System Supply 36.2 33.4 35.0 35.7 34.4

a/ Assumes 5% loss on 69 kV lines to BMC and 15% technical loss on public power system.

Source: Charles rT Main Report, ORNL/GOL Assessment, LEC and mission analysis (see Annex 14).

3.4 The Liberian power system is operated at 11OV and 60 cycles making it unique in the West African region, which receives power at 50 cycles, though the difference poses some technical difficulties for the longer term when interconnection with neighbouring power systems may be warranted. The LEC uses a transmission voltage of 69kV and a primary distribution voltage of 12.5kV. The US practice of having a large number of pole-mounted transformers is followed, though may not be so well suited to the high housing and load densities made up of many small consumers as in central Monrovia. A large but unknown number of houses are supplied at both llOV and 220V, requiring two phase meters. Remarkably, a small underground .ystem recently installed, using pad-mounted transformers, has been designed to provide power only at 230/380V, thereby excluding from use appliances built for IlOV supply. - 36 -

Short Term Problems

3.5 The LEC is currently plagued with problems of liquidity and inability to meet demand during the dry season. These problems necessarily preoccupy the management and technical staff and have a debilitating effect on the organization to cope adequately both with planning of any kind and with routine operations and maintenance. Without solving these problems the long term viability of the organization is seriously in doubt. When demand cannot be met it is not only the credibility and the finances of the LEC that are affected but economic production in the supply region, too. One minor consequence of prolonged outages is the need for private back-up generation. In the first few months of 1984 this was costing manufacturers in Monrovia alone an additional $100,000. However, when for similar economies it has been possible to quantify the economic loss due to supply disruptions, estimates of about $1/kWh not supplied have been common. Therefore, the mission believes that the highest priority should be given to measures for establishing full year round supply and restoring the LEC's financial viability.

Current Financial Status

3.6 LEC levies a uniform tariff of 15 cents/kWh, though the mission estimates the cost of supply in 1983 to be 9.7 cents/kWh, including interest and depreciation. Under normal circumstances this differential between cost and tariff would generate a substantial surplus. However, based on the unaudited income and expenditure statement for 1982/83, the LEC incurred a loss of $2.7 M (see Annex 15). The projected accumulated loss for 1983/84 is $4.8 M, though it could be higher still for it is unclear how fuel expenditure brought forward from 1982/83 has been treated, and the additional cost of fuel due to failure in hydropower supply has not been taken into account. The mission also had difficulty determining how much of the consumer outstandings were indeed collectable, and what influence bad debts would have on profit and loss when ultimately acknow- ledged. As of November, 1983, outstandings amounted to $43 million, representing some 14 months of sales. Of this Government, Public Corpora- tions and street lighting billings were US$4.7 million, US$7.5 million and US$3.6 million respectively, leaving US$27.2 million outstanding from the general public. On the other hand, the LEC owed the LPRC about US$17 million for fuel purchases, a sum which includes the cost of fuel consumed by the isolated generating stations, despite the fact that they are owned and funded directly by government. Interest charges on the LPRC component of the LEC debt now amount to $300,000 per month.

Liquidity

3.7 In early 1984, the LEC was faced with a severe liquidity problem and it was not clear that the situation would be readily resolved. Credit to government corporations is now being reduced as part of a wider program of fiscal control, giving LEC less flexibility than it previously enjoyed. LEC's liquidity is normally a function of the seasonal nature of hydropower supply, such that during the wet season when hydropower - 37 -

generation meets almost all of the demand, the cost of sales is very low, and cash surpluses are generated. The reverse occurs in the dry season when oil-fired generation is required and the cost of fuel purchases, added to other operational expenses, can exceed monthly income. Up until 1984 the LPRC was able to finance LEC's fuel purchases during the peak of the dry season, gradually becoming a major creditor, without jeopardizing its own financial viability. Now LPRC is suffering severe liquidity problems of its own, which are compounded by the sudden increase in the level and cost of the LEC dry season petroleum fuel requirement. Due to the serious damage of one of the newest fuel oil fired slow speed diesel units in February 1984, and to minimal useable flow in the St. Paul River at the Mt. Coffee hydropower plant, the substantial deficit in power supply has to be met by very inefficient diesel oil-fired gas turbines. The LEC's fuel costs were about US$1.5 million in February and March, and were anticipated to be US$2.7 million if full supply were restored with the use of gas turbines. However, the maximum monthly payment the LEC had been able to make was $700,000.

Non-Technical Losses

3.8 LEC's financial problems stem fundamentally from non-payment for power consumed. Of every 100 units generated 15 are lost for technical reasons; one is used "in-house", including free electricity for employees; 20 are consumed but unaccounted for; 16 are billed but not paid for; and 48 are billed and paid for. The records on consumption and consumers are, however, in disarray and the data presented here are the mission's best estimates drawn from a range of often contradictory sources within the LEC itself. The LEC has about 33,400 consumers on its books, of which between 5000 and 7000 are "inactive" depending on which record within the LEC is accepted as accurate. Of the total it is assumed that about 9000 are without meters, a result of either unrecorded connection or connection of supply without a meter pending its installation. As a result of unmetered legal supply, and tampered, hence faulty or inoperative meters, some 14,000 out of about 28,000 bills delivered each month are estimates of consumption, in many cases having very little relationship with actual consumption. Estimates of consumption by meter readers are very frequently contested by consumers, often with good reason and this, combined with the considerable inconvenience suffered in having bills reviewed, is the major source of consumer disrespect for the institution. In the mission's view, regardless of past failures, it is unrealistic to ignore these dire immediate financial and administrative problems and to proceed despite them to define further major investment programs. Accordingly, a number of urgent measures to address these problems are outlined below.

Reducing Non-Technical Losses

3.9 Unpaid use of power is widespread. Large commercial and small domestic consumers alike tamper with or remove meters and avail themselves of services offered by appropriately skilled operators to ille- gally reconnect power supply disconnected for non-payment, or to pay less - 38 - than the the cost of actual consumptionto a third party to maintain unpaid, or unbilled,supply. For example,disconnections numbered about 29,000 in 1983: as many as there are consumers. Obviously,consumers disconnecteddo not remain without electricityfor long, yet the level of outstandingsdoes not reflect major payments by delinquentconsumers in the course of their re-supply. These practicesare encouragedby the absence of effectivecontrols, inappropriate administrative arrangements for metering and billing,and poor design of meters and distributionat the consumerlevel.

3.10 LEC managementhas frequentlyand legitimatelybemoaned their lack of legislativepower to impose significantand swift penaltiesfor unpaid use of power, or for conspiringto extract power without paying for it. Currently,the only resort the LEC has to the courts is through civil litigation. WheneverLEC proceedsagainst a consumerthrough these channels the action takes up to a year to be heard and the penalties,if awarded, are minimal. The singlemost importantmeasure now requiredto assist in the recovery of outstandingsand to reduce theft of power is new legislationto enable the LEC to swiftly impose major penaltieson offenders. It is the mission'sview that withoutthe co-operationof the government and the courts at the highest levels the success of other administrativeand technical measures proposed here is doubtful. One means by which new powers of enforcementmay be applied is describedin Annex 16, which outlines a set of draft regulationsand proceduresfor collection of outstandings,re-connection and metering. These regulations are only indicativeof the kind of changes required; hence, some fine-tuningmay be necessary. For example, it is most importantnot to alienatethe honest consumerwho pays regularly.

3.11 The administrativearrangements for accounting and data processing can be greatly improved. The CommercialDepartment handles all metering and billing as well as disconnectionand reconnection,thereby exposing itself to collusion and corruption. The records of the Data ProcessingUnit and the Commercial Departmentfrequently do not agree. For example, data processingdoes not distinguishbetween a debtor, an inactive consumer and an active paying consumer, and even its records vary greatly from one day to the next. Furthermore,the Commercial Department has no direct access to computer terminals and printers, hence, even if the record was appropriatelyorganized, it takes several days to respond to a request, such as in the case of a consumer query, when the informationshould be available on-line. The organizationof metering and billing needs to be completelyrevamped to be compatible with an environment in which there is no reliable mail or telephone system. The mission has identifieda set of near term objectivesand matching proceduresand regulationswhich would have the effect of reducing the invitationto corruption,ensuring payment for service, and restoringconsumer confidencein the meteringand billing process. These have been forwarded to the governmentand are summarisedin Annex 16. Key modificationsto existing practices embodied in, or required by, these proposed regulationsand conditionsof serviceare as follows: - 39 -

(a) Use of Computers: terminalsand printersshould be suppliedto the Commercial Department,facilitating direct and immediate access to consumer records;cash registers should have direct input to the consumer records;and the capacity for rejection of a consumer billing if it falls outside of preset norms for that consumershould be re-activated.

(b) Meter Reading: bills should be made out and left at the premises for all bills up to a certain agreed limit in value; bills specifyingthe last reading and paymentdetails could be prepared in sequenceof meter reading route in advanceand the copies returned for verificationby computerafter the billing; there should be a totallyindependent random sample check made of billings, includingfield visits, by the Energy Monitoring Unit.

(c) Disconnectionand Reconnection:should be separated from the CommercialDepartment and placed under the Distributiondepart- ment until the commercial department is totally re-organized and the appropriatechecks and balancesare in place.

Cd) Surchargesand Security Deposits: surchargesshould be levied for late payment; substantialsecurity deposits should be required of frequentlydelinquent consumers; interest should be paid on such deposits.

Privatization

3.12 Privatizationof a componentof the meteringand billingsystem should be consideredas one means of increasingcollection and reducing illegal consumption. Under the arrangementenvisaged a private company would contract to read the meters, prepare bills, make collectionsand notify and monitor follow-up on disconnectionand reconnection,working on a fee plus percentageof the collectionsbasis. The interfacebetween the LEC and such a company, and the necessarychecks and balances,would have to be designed carefully, though the mission recommendsa pilot operation.

ReducingTechnical Losses

3.13 The design and constructionof the distributionsystem influences both technicaland non-technicallosses. While this section deals primarilywith the former it is noteworthythat the presentdesign facil- itates uncontractedextraction of power, and this should be explicitly recognized in any redesign. For example,overhead services terminating on buildings are rarely mounted at sufficientheight to minimize inter- ference and there is no means of disconnectingservices at the pole without removing the entire service drop. The distributionsystem suffers from poor conductoring,overloaded transformersand poor connections. There is evidence of poor power factorsand, of course, there is a con- fusion in design codes with the simultaneousintroduction of llOV, 220V - 40 - and 380V supplies,with both overheadand undergrounddistribution. The mission thereforerecommends the followingmeasures:

(a) Meters: the design and installationof secure tamper-proof meters. These could be possiblylockable and weatherprotected with a window to permit counters to be read without having to open the enclosure,although numerous options should be evaluated. This exercise to be integratedwith the implementation of the metering component of the AfDB transmissionloan and could be completedwithin three years.

(b) UnmeteredSupply: a review.of the prospectsfor tamper-proof load limiter moderated supply without the use of meters for very low level consumption,and the use of a flat monthly fee. For example, for consumers in the range of 0-10 kWh/month, using power only for lighting.

(c) Distribution: a thoroughreview of the distributionsystem to ensure that transformersare suitablyplaced and loaded, re- placingfaulty poles, conductorsand servicedrops, and fitting line taps in the many places where conductors are merely twistedtogether.

'd) Design criteria:establishment of new distributiondesign criteria consistentwith the need to reduce both technical and non-technicallosses.

Implementation

3.14 Both (a) and (b) can be achievedin the course of a power system efficiencyaudit and follow-up. The mission believes that such an audit is of the highest priorityand accordinglyoffered to have the work undertakenat no c:ostto the LEC within four months as part of the joint UNDP/WorldBank Energy SectorManagement Assistance Program. The outcome of the study would includea project proposalfor financiersand donors. However, there is much that can be undertakenimmediately to improvethe efficiencyof energy transfer in the distributionsystem and to mitigate illegal extractionof power. The mission found the DistributionDepart- ment to be the best administeredand technicallymost sound of the LEC departments,though it is quite unable to accept the additionalresponsi- bility of remeteringand rehabilitatingthe consumer level distribution system. The mission thereforerecommends the procurementof skilled and experiencedexpatriate services to help the existing staff implementthe required programof rehabilitation,and to establishthe operationalprocedures and staff units to implement the measures arising from the impending power system effiency audit. This project should include the revision of consumer billing and accounting, establishment of the required checks and balances to frustratecorrupt practices,and regis- tration of all supply points and new meter instalLationsarising from implementationof the rehabilitationprogram. At least two engineersand an accountantcum EDP specialistwill be requiredfor an iLitial contract - 41 - period of one year. This project is a candidate for technical assistance though if necessary it should be financed by the LEC to avoid delay in its implementation. Alternatively, these services could be incorporated into a management services contract for the LEC as a whole (see para 3.36-3.37).

3.15 The economic benefits of distribution rehabilitation are likely to be substantial, though without the benefit of a thorough audit they can only be crudely estimated. The mission accepts the estimates made by others that energy losses between the busbar and the consumer are of the order of 15% of gross generation. Technical losses for the compact MPS should not exceed 10-12%. It is beLieved that for an investment of several million dollars, comprised substantially of local skilled labour inputs, savings of, say, 3% of energy sent out, or 10 CWh costing $500,000 per year in fuel alone, can be achieved.

Efficient Use of Electricity

3.16 There is ample opportunity for the government acting unilater- ally to reduce substantial energy wastage and expenditure in its own and its parastatals' operations and in public services. Such measures are doubly important when the LEC is not paid by government for its consumption, and when services to economically productive sectors are being curtailed due to overall supply constraints. Two prospects for savings stand out: air-conditioning and street lighting. Government offices are characterized by window air-conditioners running full-time in rooms with windows open and in locations where ceiling fans could provide thermal comfort at a fraction of the cost. A recent ORNL study indicated that savings through insulation and sealing of offices would probably be few as air-conditioners had to operate at full load in any case. However, it was clear that theLr cooling effect is often minimal and that the power consumed is wasted. Government consumes 14% of public power supplies and the commercial sector, which incLudes the many parastatals, 38%. Assum- ing air-conditioning comprises 70% of government consumption and that parastatals are responsible for 40% of commercial consumption and have the same end-use pattern, air conditioning in government and parastatal offices consumes about 20% of public po'ier supply, amounting to 45-50 GWh/year. Even a reduction of one quarter of this amount means financial savings of about US$2 million/yr and a reduction of 3% of power sales. The mission recommends -- complete survey of air-conditioning units and loads in the public sector leading to z. plan for a significant reduction in window air-conditioners, and the introduction of ceiling fans, and building modifications for shading, cross ventilation and similar measures. An incentive-based system should be devised for rewarding building energy managers for reductions in office energy use in the context of conservation guidelines issued as a result of the proposed review. In addition, an important code of enforceable minimum energy standards should be devised and applied for all cooling appliances, including air-conditioners and refrigeration equipment. - 42 -

3.17 Street lighting in the Monrovia area is poorly organized and maintained. Many lights are on day and night, and lights are operating in areas remote from any conceivable need. Finally, where there is a need, lighting is energy intensive in relation to new high efficiency technology. Street lighting is not normally a candidate for significant savings though this appears to be contradicted in Liberia where it represents 23% of the Government's debt to the LEC now amounting to US$15.6 million. The mission recommends a complete review of street lighting with a view to reduction and rationalization. Poles and lighting fix- tures in use on roads in areas remote from population centers should be dismounted and stored and the circuits feeding them de-activated. The first stage of this review can be incorporated in the power efficiency audit study (para. 3.14).

Electricity Demand Projections

3.18 During the past three years several consulting engineering firms have produced load forecasts for the Monrovia Power System. All have been based on historical records of doubtful accuracy and have assumed a relatively prosperous economy during the 1980s. None seriously considered the prospect of collapse for the iron-ore enclave sector and its serious economic repercussions. As a result, highly optimistic forecasts of growth have been promoted and the impression cultivated that major new hydropower generating facilities are required to serve a bur- geoning demand. Charles T. Main derived growth rates of from 7% to 10.75%, Sofrelec from 3.3% to 5% and the AfDB adopted LEC's projection of 5%. Only the ORNL team included sensitivities in their demand forecasts considering the very low growth scenarios that now appear likely. The mission's forecast has been made with the benefit of both a better estimate of generation and saLes for 1981-83 inclusive, and a revised World Bank projection of economic growth in the light of the very depressed market for iron ore. The data presented in Table 3.3 and Annex 14 show declining sales since the change of government in 1980, and they show a clearcut relationship between GDP growth and electricity sales for the time series available. The mission's load projection is based on an integration of GDP projections and certain critical assumptions about reform and financial recovery within the LEC. These assumptions, which are listed in Annex 16, include improvements in payment, reduction in unpaid use of power, improved maintenance of thermal plant, an expanding exchange/supply arrangement with the BMC (and use of its facilities after the mine closes) and a tariff reduction in the wet season from 1986 on- wards. Although a considerabLe reduction in losses is anticipated, some 15 GWh of non-technical losses remain after 1986 and the reduced demand due to having to pay for what is now a free good is conservatively estimated at 25%. Mine sales increase as losses are reduced, and the tariff reductions in 1986 soften the impact of closure of the LAMCO mine. The resulting generation and sales projection is summarised in Table 3.4 with additional detail in Annexes 18 and 19. Sales are projected to increase by 2.8Z per annum and LEC generation by 1.4% averaged over the period 1984-2003, and 3.0% and 1.2% respectively over the 1984-93 period. Losses on the public component of the MPS are projected to decrease to - 43 - about 17.5% from about 34% within the next ten years and to stay at that level thereafter. In this projection the household and commercial sector consumption grows relative to the industrial and government sectors, such that the former between them consume 83Z of power sold by 1993, excluding mining sales.

Financial Projections

3.19 Projections of income and expenditure through the 1985/86 fiscal year have been made reflecting the above generation and sales forecast, including the projected fuel mix for the LEC generation, and the anticipated reduction in losses to flow from the recommended technical, administrative and policy changes. Under the assumptions applied, LEC's current growing annual loss is transformed into a substantial annual profit within three years, enabling self-financing of major generating plant along with reductions in tariff to reflect a long run marginal cost substantially lower than the present tariff (see para 3.36). The extent to which the present tariff remains in real terms depends on the terms applied to retire the present short term debt to the LPRC and corresponding agreements with debtors in the public sector. However, it is obvious that far from being the institution now threatening the financial stability of the public sector, the LEC can become the lead agency in restoring financial stability. This transformation will require, above all else, a completely revitalised and determined management backed by an equally determined government providing the legislative tooLs to clamp down on unpaid for use of power.

Ceneration Needs and Options

3.20 A review of the generation and sales projections (Table 3.4) and the schedule of LEC plant (Annex 12) indicate superficially that there is sufficient installed capacity to meet peak demand and almost all energy required for the remainder of the decade at least. Certainly hydropower capacity is adequate to meet almost 90% of the peak demand during the wet season; thus for the foreseeable future there need be concern only about the adequacy and cost of power supply during the dry season. However, plant availability for dry season generation is poor and it is not clear how much of the installed capacity can be regarded as firm in the medium term. Assuming that the recently failed GVM/ASEA 13MW slow speed diesel plant will be repaired; that 9MW of medium speed diesel capacity will become avaiLable after maintenance; that BMC provides 12MW firm during the dry season; and that the Mt. Coffee hydropower plant produces 1OMW firm during the dry season; then there will be no more than 8MW of peak capacity to be met with gas turbines. If the Mt. Coffee hydropower output falls to zero, as has happened this year, the gas turbine requirement to meet peak capacity will be about 18 MW. This peak load can be met by two of the gas turbines, leaving a third to contribute system reserve capacity. If gas turbine use is to be minimised or the gas turbines are retired, the requirement for new capacity during the - 44 - next 12 years is 8-18MW. Unfortunately,only 34.5 MW of 122.7 MW of LEC thermal plant was available during the 1984 dry season following the failure of a 13MW slow speed diesel, and hydropower supply fell to zero for extendedperiods. Throughthe evaluationof LEC's supplyoptions for the remainder of the 1984 dry season (March-May; aide memoire left in field) it became clear that technicaland economicassumptions leading to the above estimationof future pLant availabilityhave yet to be tested, and that the immediatesupply optionsmay also be part of the least cost solution.

Table 3.4: GENERATIONAND SALES PROJECTION FORTHE MONROVIAPOWER SYSTEM (GWh)

Non Losses on LEC Ex BMG Total Mine Public Total Technical Total Public Power Year Generation to LEC Supply Sales Sales Sales Losses Losses Supply W5

1983 362 39.5 401.5 37 237 273 70 128 34.4 1988 388 27 415 25 318 343 15 72 17.8 1993 396 38 434 5 353 358 16 76 17.3 1994 381 27 408 0 334 334 16 74 17.9 2003 461 90 551 0 461 461 19 98 17.5

Source: Mission estimates and Annex 18.

ImmediateSupply Options

3.21 In February 1984 a 13 MW fuel-oil fired low speed diesel unit suffered severe damage to its crank shaft and is unlikely to be back in service before the 1985 dry season. At the time, only 1.5 MW of 12.3 MW of medium speed dieseL capacity,and 10 MW of 68.4 MW of installedgas turbine capacity was available. Work was underway to re-commission another two gas turbinesto meet the increasingdeficit caused by failing hydropower supply. The mission proposed the use of idle diesel pLant at the LPiLCand urgent rehabilitation of the medium speed diesels with minor faults at the Bushrod power station. In addition, it proposed negotiation with the BMC to supply additional generation from its under-utilized low speed fuel-oil fired dieseLs. Savings of about US$1 million were foreseen for the remainder of the dry season if a mutually profitable agreement could be reached with the BMC for straight out purchase of power. The SRMC of each of these forms of generation are shown in Table 3.5. BMC costs are lower than LEC low speed diesel costs due to higher thermal efficiencies obtained. It is evident that the operating costs of the LEC gas turbines are well above the present tariff level, and if called on to meet a substantial part of the load would gravely effect LEC's financial situation. As there is some uncertainty about meeting - 45 -

demand with plant other than gas turbines in tlhe1985 dry season the mission still strongly recommends the establishmentof such a supply agreementwith the BMC. Certainly,it is financiallyinadviseable to use gas turbines as base loaJ plant. However, there is serious doubt as to whether these gas turbines should be consideredat all as candidatesfor longer term firm capacity,and the same questionmust also be raised for the medium speed diesel plant. Both gas turbinesand the medium speed Bushrod diesels have suffereda varietyof minor and major faultsand the cost of repairs cited ranges up to US$1 million, and may be more. The mission thereforeurges the LEC to have an independentreview made of the ongoing serviceabilityof diesel-firedplant to determine,on technical and economic grounds, which plant should be scrapped and which maintained, and hence to establish the true profile of firm capacityat the Bushrod power station until the last plant now instaLled is retired. This analysis may critically vary the generation expansion requirement loosely definedabove.

Table 3.5: SHORT RUN MARGINALCOSTS OF THERMALGENERATION, 1984

Economic Specific Fuel Cost Maintenance SRMC Cost Fuel Consumption per Kwh Cost allowance estimated Cj/USgal) (kWh/USgal) (¢/kWhi (S/kWh) (fJkWh)

LEC Plant - Slow Speed Diesels 70 14.5 4.83 12 7.09 - Mdium Speed Diesels 90 12.1 7.44 22 11.34 - Gas Turbines 9N' 6.8 13.24 20 17.93

BNC Plant - Slow Speed Diesels 70 15.4 4.54 9 6.40 a/ Technicallosses of 15% are assumedto standarizethe deliveredcost estimate. Source: LEC and missionestimates.

Long Term SupplyAgreement with BMC

3.22 BMC should be considered as a source of power in the longer term as well, quite outside of the present exchange agreement and the prospectiveshort term emergencysupply arrangement. As much as 30 MW of the 95 MW installedat the BMC is not requiredfor the presentand likely future scale of mining operations. It is evident that BMC can produce power more efficientlyand more reliablythan the LEC and that there is a basis for a mutuallyprofitable supply arrangement. The load that can be transferredis presentlylimited by the capacity of the transformersat BMC (2 x 10 MVA), and in order to increasecapacity for maximum flexibility it may be necessaryto purchase an additionalunit uniess one with suitable impedancesis alreadyavailable. The transmissionline linking - 46 -

BMC with Mount Coffee is believedto have a capacityof 40 MW, though it is reported to be in poor condition. The mission recommendsthat discussions with the BMC on the prospectsof a long term supplyagreement begin as soon as possible,and in additionto the proposalsmade here for short term emergency supply. There must also be a study of the conditionof the line and the transformercapacity as well as load flow and short circuit studies to determinethe requirementsto have BMC supply as much as 30 MW of peak demand, and for LEC to supply as much hydropowerto BMC as is availablenow or in the future. Therefore,acceptable arrangements will have to be made for both partiesto operate in parallel. At present both systems operate electricallyisolated from each other. Even within BMC two non-synchronoussystems are in operationin order to limit fault capacity. This results in lack of flexibilityand less effectiveuse of available hydropowercapacity. A synopsis of the required study of the two systems is providedin Annex 20. Since BMC is most sensitiveto being exposed to faults generated by LEC's operationit will be necessary for this study to be conductedwith the BMC's knowledgeand scrutiny if the outcome is to prove acceptable.

Fuel Oil Fired Diesels

3.23 Obviously one option for future power supply is the expansion of the slow speed diesels under LEC management.The present CVN/ASEA plant is not operated up to its reported design capabilityin terms of output or thermal efficiency and this poses questions both as to the choice of plant and the maintenancecapability of LEC staff. Even so, the SREMCbeing achieved is about 7C/kWh sold or 60% of the cost of LEC's medium speed diesels. The mission estimates the full cost of production from the more thermally efficient slow speed diesels now available as 7.34c/kWh(see notes in Annex 21). Given the problems evident in main- taiing the existingvery large slow speed engines,and the reports from LEC staff that there may be serious problems brewing with misalignment due to foundationshifts, smaller, possibly medium speed,machines should be consideredin any future aquisitionand the main contractorshould in future be responsiblefor foundationdesign and for supervisionof its construction.

Wood-firedSteam Power Generation

3.24 The mission undertook a detailed review of the economic prospect of wood-firedpower generationfor the MPS. Followinga review with the assistance of the FDA of the fuelvoodresources within reach of the main grid, an excellent site was locatedfor a wood fired steam plant in the Bomi Hills about 45 kms from Monroviaand 3 kms from a 69 kV line. Four separate supply areas totalling8,363 ha were delineatedincluding about 4,000 ha of existing short rotationplantations, state and private forest and farmland which, with proper managementand replanting,could yield 110,000 te fuelwoodannually. With a likelyplant factor of 56.5%, arising from base load generationduring the dry season,this fuel source could supply a 15 MW power plant generating72.3 CWh/year. An outline of the resource costs and proposed fuelwood supply strategy, technical - 47 - parameters, plant costs and related economic analyses is provided in Annex 22. The total cost of production is estimated to be 6.7c/kWh at the busbar. The delivered cost of this power is estimated conservatively at 8.1/kWh sold which may be compared t. the unit costs from a slow speed fuel-oil fired diesel with the same plant factor of 7.34c/kWh. On the one hand, there is no escalation in the price of fuel oil included in this cost comparison and conversely no shadow value has been applied to reflect the economic benefit of wood as an indigenous and potentially renewable fuel. Hence, the 10X additional cost of the wood-fired power generation cannot be regarded as significant in economic terms and, for the purpose of this comparison, wood-fired generation should be regarded as a serious candidate for power supply during the dry season should additional generating facilities be required in the near term. On the other hand, for the time being at least, fitLencialand management factors weigh heavily against the wood power option. The costs assumed for fuelwood harvesting, and for plantation establishment and maintenance are based on cost data applicable to a conservatively run private sector fuelwood supply operation, yet are half those experienced to date by the FDA in establishing the Cape Mount industrial plantations i.e., about $4000/ha. Similarly, the mission does not believe that the LEC can re- alistically be expected to operate and maintain a generation system which is totally new to it at the same time as rebuilding its capability to maintain its already deteriorated generating equipment. The mission believes, therefore, that the only prospect in the near term for wood- fired power, regardless of its economic viability, is under private sector management, selling to the LEC at the busbar for an acceptable profit under a long term sales contract. Allowing for a 20% real rate of return on investment as an incentive for private sector participation the effective selling price delivered to Monrovia would be about lle/kWh, which is still an acceptable price under the present tariff. In the present economic climate of Liberia, and with the LEC's P"i2or financial situation, it seems unlikely that an entrepreneur can be attracted to invest US$19 million in, and to operate, a power station in return for a long term sales contract. However, as LEC's financial viability improves a privately owned and operated wood-fired power station will become a serious prospect.

Coal as a Power Source

3.25 Liberia has no known coal reserves; hence, coal would have to be imported for power generation. Coal is not at present imported for any other industry so arrangements would have to be established with ex- porters, along with coal handling facilities at the port and the site of a power station. Only a cursory review of this option is necessary to indicate that it is impractical and uneconomic for the foreseeable future. First, the operation of a major steam power plant poses the same operational difficulty for the LEC as a wood-fired steam power plant and would have to attract the same private sector participation to be tech- nically viable in the short to medium term. Secondly, the costs of poaer generated from coal are prohibitive at the scale of generation that may be required. The mission's review of costs, which is compiled from - 48 - recent Bank experience of export, shipping, handling, capital and operating costs is provided in Annex 23. The average cost is estimated to be 10.9C/kWh sold, which is 35Y and 49X higher than wood and fuel oil diesel generation, respectively.

Table 3.6: HYDROPOWERRESOURCES OF LIBERIA

AnnualEnergy Production Resourceand Project InstalledCapacity Firm Average (Mw) (GWh)

St. Paul River C.T. Main Proposals Via StorageProject (60 m height) 132 389 680 SP-2 ProjectDownstream of via project 214 955 1,331 SP-IB Project,Downstream of SP-2 120 630 844 Expansionof Mt. Coffee Powerhouse 80

Stanley-HARZA (Preliminaryreviem stage' Via StorageDam / (A0m height) _60 na.

Mt. Coffee Expansion 34 - 130 (additional)

Mano River Sofrelecproposal b/ - Mano Hydro Scheme 180 - 595 795

a/ Would increasefirm capacityof Mt. Coffee plant fr.am10 MW (assumed)to 30 MW. b/ Half of this, or 90 MW, would be dedicatedto Liberia. Source: Sofrelec,C.T. Main, Stanley-Harza,LEC.

Hydropower

3.26 Since 1980 several large feasibility studies have been completed on major hydropower projeccs in Liberia. These studies have reviewed and specified the least cost options for the development of hydropower on the Mano and St. Paul Rivers. Table 3.6 lists the projects identified and their costs. The 14anoRiver project is sponsored by the Mano River Union, a joint organization of Liberia, Sierra Leone and Guinea, and offers 90 MW (half of 180 MW installed) for Liberia for a total power component investment exceeding US$360 million ($1981) with a lead time of nine years from engineering design to commissioning. In 1982, a U.S. consulting engineering firm proposed the development of 546 MW of hydropower capacity on che St. Paul River costing US$1.461 billion - 49 -

(,t.1982)in four stages with commissioning between 1989 and 2007. The smallest first stage development possible from these proposals was Liberia's share of the Mano River project costing at least US$200 million. During 1983 LEC recognized that it would not be able to procure financing on this scale and proceeded to have American consulting engineers (Stanley/Harza) evaluate a scaled down first stage development of the St. Paul river comprised of a low dam on its Via River tributory, and augmented capacity in the Mt. Coffee generating station. This impound- ment would increase the firm capacity of the Mt. Coffee plant by about 20 MW and increase firm energy by upto 60 GWh/year. If two additional 17 MW units were installed at Mt. Coffee according to existing design provi- sions, there would be an additional 130 GWh in secondary energy production. However, it is clear from the mission's load forecast that there is, no justification for hydropower development on a large scale this decade, although the feasibility study completed does lay essential groundwork for determining the costs and benefits of augmenting supply from Mt. Coffee in line with near term needs and potential markets. While the mission is very doubtful that even the scaled down Via storage proposed is part of the least cost solution for power supply within the next decade, it is prudent to await the outcome of this study before committing finally to the generation expansion plans proposed here.

Upgrading the Mt. Coffee Hydropower Station

3.27 The Mt. Coffee plant can be upgraded by modernising the turbine runners and possibly also rewinding the generators, and by adding new turbines for which intake gates and excavations l"ive already been provided. These modifications are not mutually exclusive and could form part of a staged program of enhancement of both energy and capacity. In the first instance there is evidence from recent studies that turbines designed in the 1960s and earlier can be upgraded with new computer designed runners to increase efficiency by 2-4X, and energy production by 10-15Z. The Mt. Coffee plant is in this category and preliminary estimates of the costs received by the mission show attractive returns on investment. However, the technical capacity for enhancement is very machine specific and a study is required to confirm that the anticipated benefits apply and to define the actual energy and capacity increments that can be expected for the Mt. Coffee plant. The mission recommends that this prospect be reviewed as part of the power system efficiency audit. While the addition of another 17 MW turbine will not contribute firm capacity or energy during the dry season without the addition of the Via storage, and cannot be seen as an alternative to oitherspecific dry season options, the addition offers a means of reducing fuel imports by replacing fuel oil generation at the Bong Mine, and the prospect of a lucrative business for the LEC. The additional supply of power to the mine may require improvement in 69kV transmission line, and increased transformer capacity though at a small cost in relation to the turbine. In order to evaluate this prospect the mission made the following assumptions: - 50 -

(a) expenditure of US$19 million for a 17 MW machine installed over two years from 1986.

(b) additional annual output of 60 GWh and 70 GWh.

(c) half of the additional output utilised in 1994 - the year after the BMC closes - and the remainder utilised progressively over the next five years.

(d) fuel oil savings of 5c/kWh - about the current fuel cost of operating fuel oil-burning thermal plant.

Ce) 25 year life.

With fuel savings as the only benefit, the project generates 12.5% and 14% ERR for each energy production level, respectively. The return on investment would increase substantially if a storage system is built up river fairly early in the project life.

Conclusions and Recommendations on Generation Expansion

3.28 In the first instance the mission has only been able to estimate the true firm capacity at the Bushrod Power Station, and has no advance impression of the incremental capacity and energy production possible from the rehabilitation of distribution and generation facilities. Therefore, the assumptions made here regarding available capacity upon which the need for new generation capacity has been based need to be tested by:

(a) an early and comprehensive power system efficiency audit, and

(b) a complete review of the technical and economic availability of thermal power plant.

T.hesestudies should be combined and undertaken as a matter of urgency as part of the technical assistance already offered by the Bank under the Energy Sector Management Assistance Program. The following conclusions and recomendations reflect an optimistic view of present and future firm capacity of currently installed plant. They are that:

(a) the least cost solution to meet generation needs for the remainder of the decade is to establish a supply agreement for up to 30 MW peak from BMC's underutilised slow speed fuel oil fired diesel plant.

(b) if the BMC cannot supply any or all the required capacity, one or two 9MW heavy Juty diesels should be procured as soon as possible.

(c) an additional 17 MW unit at the Mt. Coffee plant is desirable immediately after a contract of sale for the additional energy output is established with the BMC. - 51 -

(d) if when BMC closes (assumed to be the early 1990s) its diesel plant is unserviceable and/or LEC is unable to take over its operation, wood-fired steam power and additional slow speed diesel plant appear now to be the main alternatives for dry season power supply.

Generation and Transmission Planning Studies

3.29 It is clear from the many assumpticns made in formulating the above proposed generation expansion plan that the size and timing of new generation investments is uncertain, being influenced by the outcome of other urgent studies the mission has recommended for existing thermal plant and distribution and generation rehabilitation, and the response to measures to enforce payment for electricity consumed, among other vari- ables. Hence, the precise form of a power subsector program must be defined by a rigorous least cost expansion planning study immediateLy following the above-mentioned studies and the finalization of the Stanley-Harza report. The study should also include transmission expansion planning because of the major transmission projects nearing implementation and which, in the mission's view, are of questionable priority (para. 3.31). Such plans would also facilitate a decision on the contractual relationships between the BMC and the LEC, allocate priority to the many distribution and generation/rehabilitation projects that are certain to be identified, and define the priority and design of the mission's proposals for transmission expansion. The power subsector investment plan proposed by the mission (para. 3.40) is therefore tenta- tive for the period 1984-87 in that although the level of funding required is unlikely to be significantly different the precise form of the investments will very likely change.

Hydrology

3.30 The complete failure of hydropower production from the Mt. Coffee plant is not an unusual occurence and yet the generation facility is regarded as having a firm output of 8-10MW. For a run-of-river scheme, failure to produce any power at all, even for a very short time means that there is no firm power supply and 100% back-up is required. For several years in the early seventies, and again in 1983, there were periods of weeks at a time during which production was zero. Again, during the course of the mission production was entirely discontinuous, with either 4-5MW of output supplied for two or three hours a day, or no production at all. Indications from the hydrological record are that the 1985 dry season could follow the same pattern. First, the mission recommends that for planning purposes LEC regard the firm output as zero, and instruct consulting engineers accordingly. Second, the original assignment of 8-10 MW firm must have been based either on a misinterpre- tation of the hydrological record or planning guidelines, or the hydrology has changed. With this uncertainty, the mission recommends that the hydrology of the St. Paul river be re-interpreted with the benefit of recent data, including the record of actual production from the Mt. Coffee plant, and a revised set of probabilities published for the purposes of hydropower design and analysis. - 52 -

TransmissionExpansion

3.31 Two major transmissionexpansion programs are now underway. The "third extensionproject", financedby KfW, is almost complete,and the second,which is financedby the AfDB, has just been finalisedand is about to start. This project involvesthe expenditureof US$23 million, most of it on a new 48 km 69 kV line to the airportat Robertsfieldand a 65 km line to Robertsport,both with lattice tower construction. The airport (i.e., Robertsfield)transmission project includesa double circuit lattice tower with 2 km of underground69 kV cable and a new indoor substationin open country. The Robertsportline will interconnectonly 500 kW of demand,and it is unclearwhether the Load will grow or decline as, on the one hand, there have been frequent interruptions in supply from the isolated diesel plant and, on the other, the average tariff charged is only 4C¢kWh compared with the l5C/kWh that should be charged when the load is connected to the MPS. There must be serious doubt as to whether the load will reach 1.5 MW as anticipated in project documenta- tion if the full cost of supply is paid by consumers. The airport line is in poor condition in parts, though this does not necessitate an entirely new line for such a small load. Instead, that part of the line which is inaccessiblein the wet season needs to be relocated and some poles replaced. The mission recommends an urgent review be undertaken in liaison with the AfDB of the benefits of proceeding with these transmission projects as now defined in the light of the urgent requirement for rehabilitation of the distribution and parts of the generation system.

3.32 Energy losses are likely to increase with the addition of the proposed transmission lines, whereas upgrading the 12.5 kV line to Totota to 69 kV would decrease losses and facilitate, in due course, the interconnection of Gbarnga, the largest and possibly firmest of the isolated generatingsystem loads. It should be possible to carry several mega- watts on a 69 kV line to Cbarnga even though the distance from Monrovia is about 200 km. However, just as with the other major transmission projects, it is essential to establish that a firm economic load exists at the economic cost of supply before embarking on construction. This means the implementation and enforcement of reasonable metering, billing and collection procedures in these systems just as proposed for the MPS (see para 3.10).

Isolated Supply Systems

3.33 The LEC provides top management services for the GOL isolated generating systems which are all small towns remote from the MPS. The list of nine generating stations and their consumer, generation, sales and fuel consumption data for 1982/83 are provided in Table 3.7 and the characteristics of the generating plant are provided in Annex 24. All centers are supplied with diesel generation and most plant is second- hand. An additional 5.9 MW of diesel generators was bought in 1978 with sets ranging from 87 kW to 1000 kW, though these have yet to be - 53 -

installed. The data presented here and the balance sheet for the isolated supply centers indicates that average thermal efficiency is about 25Z, leading to an annual consumption of 2.6 MM US gaLlons of diesel oil. The variable costs of production for the supply of 27 GWh were US$6.3 million, or 23.3 cents/kWh generated, or 27 cents/kWh sold, compared with revenues of $937,000 or 3.5 cents/kWh. In effect, the government budgeted an operating subsidy of $750,000 and experienced a subsidy (loss) of US$5.3 million. The main reason for the loss is that as few as 15Z of consumers per center are metered and, in the absence of meters, pay a flat fee of only $10.00/month regardless of the level of their consumption. A simple load projection for the isolated centers combined is presented in Table 3.8. By 1993 the load will have reached 49 GWh and implies the installation of all the diesels now in storage by the end of 1985 as planned. The GOL is planning a US$36 million Rural Electrification Development Project, yet there is no plan for upgrading the tariff, metering or collection system. If the load grows as it is projected to without any of these financial and management reforms the annual loss, or subsidy, will grow to US$8 million. First, the present loss cannot be afforded, and is difficult to justify on social or economic grounds. While the GOL may consider there to be sociaL or poLi- tical grounds for subsidizing very low income consumers in rural areas, the great bulk of the consumption appears to be by relatively high income consumers. On the other hand, the annual financial loss appears to be a large proportion of anticipated uncommitted annual development expenditure and yet no clear-cut Government decision is being made to expend these scarce financial resources in this way. In summary, the mission recommends that:

(a) the tariff be increased to cover at least the variable costs of production over the next three years (about 27 cents/kWh), starting with an immediate increase to the level of the tariff on the MPS of 15 cents/kWh.

(b) meters be installed for all consumers as soon as possible and that meter reading and billing systems be upgraded and enforced in line with proposals made here for the MPS. In addition, load limiters may be appropriate for very low level consumption, accompanied by a flat charge.

(c) that until the above measures have been implemented no new connections and no new generating plant should be instaLled, including any alternative wood-fuelled or hydropower supply system.

(d) in the event that these measures are implemented, and consumers have experienced close to the full cost of their consumption, demand forecasts should again be made on which to plan and economically justify the addition of new conventional or aLter- native generation systems. - 54 -

Table 3.7: CHARACTERISTICSOF ISOLATEDGENERATING SYSTEMS, LIBERIA, 1982-83

Number of Installee Peak Electricity Fuel Location Consumers Capacity Demand Generated Consumption (kW) (kW) (GWh) ('000 US gal)

Harper 1,058 1,300 1,200 4.2 402 Gbarnga 1,050 4,580 a/ 1,500 6.0 576 Greenville 1,000 1,000 900 3.9 368 Voinjama 700 1,300 1,000 2.9 271 Zwedra 640 1,300 580 3.0 288 Sanniwelli 524 950 800 3.2 299 Kolba City 245 285 240 1.2 106 Bellafanai 100 333 100 1.0 92 Robertsport 320 505 450 1.5 143

Total 5,637 11,553 26.9 2,545 a/ Gbarnga has 2x2.5 MW units out of service. The remaining unit has an effective capacity of 589 kW. Source: LEC

Table 3.8: LOAD PROJECTION FOR ISOLATED GENERATING STATIONS, LIBERIA, 1984-93

Installed Load Electricity Fuel Year Capacity Factor Generation Consumption (MW) (M) {GWh) ('000 US gal)

1983 11.5 26.8 27.0 2,600 1984 12.2 ; 28.6 30.6 2,960 1985 16.3 - 28.7 40.9 3,960 1986 15.8 30.2 41.8 4,040 b/ 1987 15.3 31.9 42.8 4,130 1988 14.8 33.6 43.6 4,220 1989 14.4 35.4 44.6 4,310 1990 13.9 37.3 45.6 4,410 1991 13,5 39.3 46.5 4,500 1992 13.2 41.0 47.5 4,600 1993 12.9 42.9 48.5 4,700

a/ All 5.9 MW of diesel units now in storage to be in service by end of 1985. b/ After new capacity is in service, net increase in generation, hence in fuel consumption, is 2.2% per year. Gross increase in generation of 5% was projected by LEC, however equipment derating and retirement, plus poor fuel supply logistics will limit growth. Source: Mission est.o.ates. - 55 -

AlternativeEnergy Supply for IsolatedPower Generation

3.34 The mission reviewed the technical and economic prospects for alternativesources of power in the isolatedgeneration systems. The GOL is consideringa combinationof wood gasificationand wood steam driven generation,and small hydropower. Although the mission has concluded that until there are major reforms in tariff, metering, and billing in these systems there should be no investmentin generationof any kind, 2/ it is useful for the longer term to report the findingsof its evaluation of the alternativescited. The mission undertook detailed analyses of its own in respect of the woody biomass power supply options as well as reviewing a recent report of a German consultingengineering group for the GOL which sought to identify an investmentprogram for power supply from alternativeindigenous energy sources for each of the nine isolated power systems. The mission also visited and reviewed the costs of production for a recentLyinstalled 1200 kW wood-firedsteam plant in Sierra Leone, and reviewed design parameters with the manufacturer in West Germany. In addition, the mission benefited considerabLyfrom the rich data base being assembled on installed and operating costs of woodfuel gasifiersas part of the World Bank/UNDPglobal gasifiermonitoring program. A summary of the technicaland economicparameters and the resulting cost analyses is provided in Annex 25. Up to about 700 kW, it appears that wood gasification is marginally cheaper than wood-steam power. However, it is evident that at above 700 kW, a wood-fired steam plant will become a lower cost alternativethan wood gasificationgiven that the costs for che formerhave been reduced considerablyin this size range in the last three years with new design and packaging concepts. However, the comparison is at best superficialas gasificationis not proven as a commerciallytransferable technology for developing countries. Productioncosts indicatedfor a wood-fired steam plant in the range of 500-1000kW - a likely size for a future isolated power system in Liberia -- are about 17-22C/kWh,compared with diesel costs on the order of 25-40C/kWh. The mission concludes that, for the time being, there is no economic or technicaljustification for proceedingwith wood gasificationpower systems in Liberia. Similarly,despite its promise as an economic alternative, wood-fired steam generation should not be further evaluated until the financialmanagement, and the operationsand maintenanceof the isolatedsystems improve,and demand is stable at the economiccost of diesel generation.

2/ An exception could be an independententerprise venture which would have to introducesuch reforms to be viable. - 56 -

ElectricityPricing

Short Run MarginalCost of Hydropower

3.35 The short run marginalcosts of supply from thermalplant were presentedin discussingthe least cost option for supply during the 1984 and 1985 dry season (para. 3.22). By comparisonwith hydropowergeneration at the Mt. Coffee plant the estimation of thermal SRMC's is straightforward,hence there is merit in establishingthe short run costs of hydropowerprior to examiningLRMC's and reviewingan overall pricing policy for the power subsector. Superficially,with hydropower supply surplusto the public systemrequirements during the wet season,the SRMC of hydropowerwould appear to be very low. However,because of the exchange agreementwith the BMC, the surplus effectivelyreplaces LEC fuel oil diesel generationthat would otherwisehave to be producedduring the dry season. Since the energy exchangeis meteredat the terminalsof the transformersnear BMC's generating station,LEC incurs the transmission loss in both directions. Assuming that the loss between Mt. Coffee and BMC is 5%, and that supply from BMC replaces output from the fuel oil plant at LEC, every 1.3 x 1.05 kWh of hydropoweris worth 6.02C/kWhat the BMC terminalsor with a 15% transmissionloss 7.09 cents (from Table 3.5) at LEC's consumers terminals. The SRMC of hydropower is, therefore, 5.19C/kWhduring those periodswhen LEC suppliesBMC. During peak hours when hydropowergeneration is at the limit of plant output, the SRHC is equivalentto the marginalcost of generationfrom slow speed diesels,or 7.09C/kWh. Now, whiLe gas turbinesare in use at the margin of supply, the SRMC of hydropoweris 13.lc/kWh. If it is not possibleto supplyany furtherhydropower to BMC then the marginalcost reflectsthe actual cost of production,which is as low as 0.5C/kWh.

Long Run MarginalCosts

3.36 The generation expansion plan proposed assumes expansion of hydropowersupply from the Mt. Coffee plant, and additionalslow speed diesel engines fired with fuel oil. It is expedientto define the LRMC simply as the average incrementalcosts of productionfor the pattern in which the variousplant are anticipatedto be utilized. Transmissionand distributioncosts are the average rather than marginal costs due to the lumpinessof the transmissionand distributioninvestments. The resulte of these computationsare provided in Table 3.9 and notes on the parameters used in the cost analysis are provided in Annex 26. The long run marginal cost estimate for low voLtage consumers is 9.33C/kWh,although it is importantto note that these LRMC's do not take into account non- technicallosses or LEC's very substantialoverheads, both of which are assumedto be reduced to acceptablelevels in the short to medium term.

Tariffs

3.37 The official tariff for all electricitysupplied by the LEC is 15c/kWh, comprised of a flat rate of lOC/kWh and a fuel surcharge of - 57 -

SC/kWh. This rate has been charged since October, 1982. Clearly,this tariff is substantiallyabove the LRMC's for all classesof consumption, though there can be no reductionin tariff as long as LEC's lossesare so high. In considerationof LEC's financial situation,projections were made showing the prospectof handsomeprofits within the next four years followingimplementation of a number of essentialmeasures, even despite a tariff reduction in the wet season of 1986. The seasonaldifferences in LRMC are substantialand will become more so if an additional17 MW hydropower unit is installedat Mt. Coffee. In the process of tariff reform this differenceshould be recognized. Nevertheless,it is clear that for the next three years at least financial considerationswill overrideeconomic considerations;hence, the mission'srecommendations on pricingare:

(a) that no change be made in the interim to the LEC tariff, but that the GOL tariff for the isolatedsupply systemsbe brought up to the LEC level immediately,and steppedup to the variable costs of productionover the next three years.

(b) that a full tariff study be made before the 1986 wet season to examine the prospects for tariff reform with the benefit of hindsight in regard to the success or otherwiseof loss reduction and managementinitiatives proposed by the mission.

Table 3.9: LONG RUN MARGINALCOST ESTIMATES, MONROVIA POWER SYSTEM,LIBERIA (U.S. cents) F-ueloil Fixed Price Build-up Diesels Hydropower Averagea/ Busbar LRMC 9.30 3.92 6.96 TransmissionCosts 0.93 a/ 0.61 Cost Deliveredto PrimaryVoltage (69 kV) 10.23 4.53 7.75 PrimaryDistribution Costs 10.93 0.61 Cost Deliveredto High Voltage Consumers (12.5 kV) 11.26 5.14 8.54 Low VoltageDistribution Costs 0.93 0.61 Cost Deliveredto low voltageconsumers (110/220V) 12.09 5.75 9.33 a/ Assuming43.5% hydropowerand 56.5% diesels (Annex 18). Source: Mission estimates,Annex 26.

It will be appropriateto pay particularattention to the followingcur- rent deficienciesin tariff form and structureat that time:

1. the applicationof minimummonthly charges. 2. provisionof a discountfor high voltageconsumers. - 58 -

3. reduced rates, possibly with load limiters instead of meters fcr lights only supply. 4. provision of incentives for major consumers to use wet season supply who can accept interruptable supply in the dry season due to their own back-up plant. 5. penalties for poor load factors.

Other ancillary service charges need to reflect their true cost, and some reform has been proposed in the recommendationsalready forwarded to the government regarding the means for rapidly increasing the proportion of paying consumers and reducing non-technical losses (see Annex 16).

Management Issues

3.38 In looking at LEC's operations, the mission observed that the LEC offices and administration needed to be reorganized, filing and record keeping was either unsystematic or non-existant and data often contradictory. Office layout requires better planning, and there is negligibLe office security. According to its own standards, the LEC currently is overstaffed and the efficiency level low. Since 1979 sales have dropped, while the number of employees has increased by 30%, and the payroll has almost doubled in nominal terms. The target set by the LEC in 1979 of one employee per 35-40 customers, which translates to a need for between 700 and 800 staff, is a reasonable initial objective. Thus, there should be scope for a reduction in staff of 400-500 over the next two years. Internal re-organization and a manpower and training needs assessment should be carried out in parallel. A security system in the offices, allowing only those people with official business to enter the office building, also should be introduced.

3.39 The absence of an effective management information system makes it difficult, if not impossible, for top management to make rational de- cisions about the allocation of resources. This is well illustrated in generation maintenance where the least economical thermal plant was being rehabilitated to meet the shortfall in supply in the 1984 dry season while much less expensive plant with mostly minor operating faults was being ignored. There is no maintenance scheduling system, and only limited operational data on which to make a least cost decision. Simi- larly, system planning is rudimentary, and for the most part is not done at all. Options for generation and transmission expansion are selected and defined in an ad hoc manner and demand projections are inadequately based and, in consequence, frequently overestimated. There is an urgent need for a better management information system, both for planning and budgeting, and for monitoring the results of policy, pricing and administrative measures designed. Similarly, with the reconstitution of the board it is vital that short, medium and long term goals which fully reflect needed reform and rehabilitation, be defined as a framework for formulating work programmes and timelines. This is a formidable task, however, and the mission does not believe that, along with already difficult problems, the present senior LEC staff can be expected to cope. This raises the question of management services in general, as already in - 59 - this report special interventionhas been proposedfor implementationof distributionrehabilitation programs, for modifying consumerbilling and accountingprocedures, and for the developmentof a managementinforma- tion system. The mission is of the opinion that all of these tasks need to be coordinatedunder one managementservices contractand sees only two choices:

(a) an extensivecontract covering the provisionof all top management posts, including General Manager, Commercial Manager, Chief Engineerand SystemsPlanner, or

(b) a limitedresponsibility contract with engineering,accounting, and planning expertise deputised to the General Manager as a specialtask force.

The mission recommendsthe adoption of the former, as the experiencein the LEC of contractingsenior expertise without significantauthority, wide responsibilityand clear cut accountabilityhas been very poor. The record for the last decade shows that immediateimprovements are gradually eroded by pervasivedisorganisation and lack of discipline. The present LEC management has inherited a system which is vmry difficult to improvewithout fundamentalchange, and the suggestic.that these changes should be attempted by an outside contractoris no reflection on the integrityor dedicationof the present Ceneral Manager who has only recently been appointed. Indeed, it is essential that, in undertakinga comprehensivemanagement services contract, provision is made for the present managers to participatein the implementationof reforms and to undertake special training in the form of short courses and on-the-job training elsewherein anticipationof managing the companyat the end of the contract period. To ensure continuityand to provide security for dedicated top managers in the present administrationsome use could be made of executive director positions and similar arrangements. A contract may have to be negotiatedon a fee plus incentivebasis for it will be difficult otherwise to attract appropriatelyskilled and experienced individuals.

SubsectorInvestment and TechnicalAssistance Requirements

3.40 The recommendationsmade here for systemrehabilitation and expansion, pre-investmentwork, studies and contract expertise have far- reaching implicationsfor investmentprogramming and the use of available technical assistance and donor support. The expenditureproposed is identifiedin Table 3.10 year by year for the 1984-93period. This is an indicative"desirable" investment program and will need to be augmented and revised as reviews of distribution,transmission and generationsys- tems analysis are completedas proposed and investmentcosts are better defined by detailed engineeringdesign and costing analyses. The econc- mically justifiedcapital investmentappears to be US$103million for the decade, with about half of that requiredduring the next four years. The - 60 - foreign exchange component of this investmentand studies program is US$83 million. Assumptionshave been made here regardingthe existing transmissionexpansion program which are at variance with the present program defined and agreed for AfDB funding. The major components of this program are either scaled down or delayed, and it is Implied that the funds are used insteadfor urgentlyrequired distribution and geners- tion rehabilitationwork. The investmentprogram outlined in Tabie 3.10 includes projects of varying priority. Faced with severe limitationson foreign exchange and ongoing shortagesof local finds, a "minimun" investment program would appear at this stage to exclude both the Mt. Coffee 17 MW unit addition and associatedworks, and the transmission extension and upgrading for Totota and Gbarnga. The investment in the Robertsklerttransmission line appears to the mission to be of even lower priority,though it is already fundedunder the AfDB loan and is regarded here as committed but delayed subject to the above proposed discussions. The remainingprojects are, in one form or another, indis- pensible if supply is to be maintainedand the LEC is to become financially viable, though their precise form is to be determinedby Least cost planning studies,subsequent to the Stanley-Harzaand other prefeasibility studies. This translates into an absolute minimum investment program of US$70 million for the decadewith a foreignexchange component of US$50 million. The LEC is quite capable of generating under its present tariff the additional US$20-25 million of local funds required for the desired,or the minimum,*nvestment program, as well as servicing this new debt and retiring old debt, providing the proposed short term reformsand rehabilitationprogramnes are undertaken. Table 3.10: POWER SECTORINVESTMENT PROGRAM, LIBERIA, 1984-93

1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 Total Capital Investments Generation Hydro-turbine generatorupgeadtinR 1.85 1.85 3.70 Slow-speeddiesels (18 MW) 4.05 4.05 4.05 4.05 16420 Mt. Coffeeaddition (17 MW) 9.50 9.50 19.00 Rural diesel installation and rehabilitation 0.50 0.50 0.50 0.50 0.25 0.25 0.25 0.25 3.00 Wood-firedpower or diesel power (15-20MW) 4.75 9.50 4.75 19.00 Wood-firedpower for isolatedcentres (2 MW) 0.75 0.75 0.75 0.75 3.00 Diesel/GasTurbine Rehab. 0.5 0.5 0.5 1.50 Subtotal 0.5 6.40 16.40 14.05 4.55 1.25 1.00 5.75 10.50 5.00 65.40 Distribution/Transmission Meters 0.2 0.30 0.30 0.30 0.10 0.10 0.10 1.40 Distributionrehabilitation 0.2 0.50 1.00 1.00 1.00 0.50 0.50 0.10 0.10 0.10 5.00 BMC-LECexchange capacityand paralleling 0.50 0.50 1.00 Totota 69 kV line 2.00 3.00 3.00 8.00 Totota Gbarnga69 kV 1.00 3.00 6.00 10.00 Rural distribution 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.90 Robertsfield69 kV 1.00 2.00 3.00 Robertsport69 kV 2.00 4.00 2.00 8.00 Subtotal 0.4 1.90 5.90 4.90 5.20 5.70 10.70 2.20 0.20 0.20 37.30 Pre-Investment Studies and Contracts Meteringbilling crew 0.1 0.25 0.25 0.25 0.85 ManagementContract 0.25 0.50 0.5 0.50 0.50 0.25 2.50 Power System Efficiency and bMC exchangestudies 0.1 0.05 0.15 Tariff/Generationand TransmissionPlanning Studies 0.10 0.10 0.10 0.10 0.10 0.40 Subtotal 0.20 0.65 0.85 0.75 0.50 0.50 0.35 0.10 3.90 Total 1.10 8.95 22.65 19.70 10.25 7.45 12.05 8.05 10.70 5.20 106.60 - 62 -

IV. HOUSEHOLDAND ENERGY

Introduction

Household Energy

4.1 Although Liberia has extensive forest cover, the majority of its people use woodfuels for cooking and the extent to which this practice is assured in the long term is not well understood. On the one hand, despite an abundant supply of firewood to most of the rural population, with growing urbanisation localised shortages in the supply of good quality woody fuels may be developing. On the other hand, in comparison with neighbouring countries, Liberia's forest resources are rich, and have even been considered as a source of charcoal for the urban markets of Sub-sahelian zone countries, such as in Mauritania and Senegal. The main concerl3 in the household subsector are, therefore, whether wood fuels will continue to be available at a reasonable price to the rapidly growing urban population, and whether there are any realistic prospects for charcoal exports from Liberia to other countries in the West Africa region. Another legitimate, though relatively minor, issue to be examined ,riefly is the supply of petroleum fuels for household cooking. With the cessation in 1983 of petroleum refining in Liberia, the supply of LPG and kerosene became erratic, causing shortages and sharp price increases.

The Pattern of Household Energy Use

4.2 Household energy consumption is about 70% of total final energy use in the Liberian economy. About 98% of this consumption is primarily for cooking and the majority of the remainder is for lighting and cooling (air-conditioning and refrigeration). Roughly three quarters of household energy use occurs in rural areas even though 35% of the population is urban-dwelling. This is accounted for both by more efficient energy use in the urban areas through tha greater use of modern energy forms, and by the rural popuLation's acce:ssto an abundance of firewood in the process of clearing forests for shifting agriculture. Although the usual dichotomy applies whereby the majority of modern fuels are supplied to urban areas and rural areas predominantly consume woodfuels, Liberia is characterised by having more than half of its kerosene consumption in rural villages and communities. It is also noteworthy that charcoal is displacing firewood in urban areas well in advance of severe fuelwood shortages in the immediate hinterland of the cities. Charcoal is used, at least occasionally, even by the highest income groups in Liberian society.

4.3 The composition of household energy consumption is provided in the following table. - 63 -

Table 4.0: HOUSEHOLD ENERGY CONSUMPTION, 1983 ('000 toe of final energy use)

Fuel Cooking Lighting Total Percent

Firewood 556.2 - 556.2 87 Charcoal 69.5 - 69.5 11 Kerosene 1.0 4.4 5.4 1 Electricity 1.8 7.2 9.0 1 Liquefied Petroleum Gas 0.3 - 0.3 Negligible

Total 628.8 11.6 640.40 (Z) 98.0 2.0 100

Woodfuels comprise 98% of total household fuel consumption on the basis of final energy use, and of this charcoal comprises 11%. However, by the methods traditionally empLoyed for charcoal production in Liberia, about 9 tonnes of air dried wood are required to make one tonne of charcoal, hence on the basis of primary energy use charcoal comprises at least 35Z of total woodfuel consumption. As urbanisation proceeds the share which charcoal makes of total woolfuel consumption will increase. Given the projection of Limited growth in the Liberian economy it is unlikely that the share of modern fuels in the household market will increase notice- ably during the next decade.

Comparative Economy of Household Fuels

4.4 Since the capital city of Monrovia is the focal point of the cash economy, and the largest urban centre, it is appropriate to concentrate largely on the prices and costs of fuels currently traded in that marketplace. These data are provided in Table 4.1. The efficiency of household cooking devices is a critical variable in determining the relative economy of these fuels. 3/ The most expensive cooking fuel is LPG, due entirely to the closure of the refinery which, up until January of 1983, adequately supplied market demand. Now LPG is brought either by sea, in bottles in containers, or by road from the towns bordering the Ivory Coast where it is produced in the refinery there. It is generally

3/ The efficiency data applied here are based in the case of charcoal on measurements by the mission of the stove type in common use, and for other stoves are derived from recent laboratory and field testing for the Energy Department of the Bank. It is important to note, however, that efficiency at a point in the stove's power rating is not necessarily a guide to its overall fuel economy in the course of cooking for the local diet. - 64 -

recognised that demand exceeds supply for this fuel, even at the current high price, because of the flexibility it offers high income households, and restauranteurs, in backing up presently intermittent electricity supply. Kerosene appears to be the next most expensive fuel when purchased in tiny quantities from street vendors. However, this kerosene is destined largely for the special market of lighting charcoal fires, and is unlikely to be displaced in this role by another fuel even at these prices (often amounting to $6-81US gallon, for a market of about one million liters per year). Electricity is more expensive at present tariffs and short run marginaL costs than kerosene purchased from service stations assuming, of course, that the consumer is actually paying (see Chapter III). In the long run the marginal cost of electricity should fall to a level about 70Z above the long run economic cost of kerosene. In the current marketplace it is clear that woodfuels are cheaper than their modern competitors and, remarkably, that charcoal is cheaper than firewood in most of the city's marketplaces. Based on interviews with traders, wholesaLers and retailers, the market appears to be responding to the comparative price advantage of charcoal as firewood sales in city centre markets have been declining sharply in recent years. This is less true of the suburban markets, though given the relative abundance of rubber tree wood within 50 miles of the city this feature is worthy of further examination.

4.5 Additional detail on the present market prices of both firewood and charcoal is provided in Annexes 27/28. These annexes indicate considerable variation in the retail price of botb fuels within the city although, from the sampling of markets undertaken by the mission, the lowest prices for charcoal were, with. one minor exception, 15-20% below those for firewood, and charcoal was conmonly haLf the price of firewood. In general, consumers do not appear to discriminate carefully between markets on the basis of price, or to recognise the enormous variations in weight between bags of charcoal due to wide variation in basic density of the original wood feedstock. The former observation can be explained by the consumer's lack of mobility within the city which has very many localized markets, whereas the latter quite likely derives from retailing without weighing scales but in standard packages (the rice bag). There is a preference for so-called "bush" wood charcoal over the softer and faster burning rubber wood charcoal. This preference is unwittingly reinforced by the weight of a standard rice bag of rubber-wood charcoal being 20-40% below that of denser bush-wood charcoals (especially "ironwood" Lophira sp. charcoal). It remains surprising, however, that firewood is being sold in about 10 kg bundles within 40 miles of Monrovia for about $25/te, or half to one quarter the price prevailing in city markets. Moreover, rubber-tree wood is being delivered to bakeries from about 70 km from the city for about US$40 per tonne, which constitutes a cheaper fuel than the cheapest charcoal on the market. Despite these apparent market anomalies the mission was generally impressed with the efficiency of the private sector supply system and sees no justification for government participation in this component of the woodfuel market. On the other hand there is a role for government in identifying the fuelwood resource anu in providing incentives for its efficient exploitation. These matters are discussed below. - 65 -

Table 4.1: COMPARATIVECOST OF HOUSEHOLDENERGY FORMS IN MONROVIA, LIBERIA, FIRST QUARTER,1984

Conversion Cost Per Energy Value Cost per Efficiency Cost of Energy Unit Sold Specified Unit Energy (PHU a/) Utilized (MJ/Unit) (C/lMJ) (S (C/lMJ)

Electricity Present tariff 15 deAWh 3.6 MJAkWh 4.17 65 6.41 Present average cost (1983) 9.7 d/kWh 2.69 4.15 SRMC (est.) 18 e£AWh 5.00 8.69 LRMC (est.) 9.3 d/kWh 2.58 3.97

Kerosene Official retail price S2.35 per 139 MJ/ 1.69 35 4.83 US gallon US gallon 45 3.76 Street stalls (for S1.OD/760 ml. 3.59 50 3.38 lighting charcoal) bottle (min.) 10.25 Long Run Cost, 1993 S1.13 per 0.81 2.31 US gallon CIF

Liquefied Petroleum Gas Economic cost of delivery by private sector (e.g. Firestone Co. ex. Freeport, USA) S2.60 per kg 50 MJ/kg 5.20 45 11.56 Retail Price (if available) S2.00 per kg 4.00 8.89

Charcoal Retail prices l0C per 29.7 0.75 24 3.12 (see Annex 28) 0.45 kg tav) heap. 30 2.50 (S222/te) $2.50 per sack 0.48 2.00 of 9.5-21.0 kg (S143/te, av) 30 1.60

Firewood Retail prices Inner City 11-1.50/bundle of 11-21 kg. 17.3 0.52 13 4.0 (S85/te, av) Suburbs S1.35 per 27 kg 0.29 2.2 (see Annex 27) bundles

10d per 1.4-1.8 0.36 2.8 kg bundles

af PHU = Percentage of heat utilized. Source: Mission estimates and measurements. - 66 -

Woodfuel Supply and Demand

Present Woodfuel Resources

4.6 Not only is Liberia more heavily forested than most other countries in the West Africa region but it is thought by some to be more heavily forested now than several hundred years ago when population is said to have been greater than at present. High forest with closed canopy is nevertheless on the decline again and it is necessary to reflect on the implications of this current trend for the energy sector. The forest resources of Liberia are summarised in Annex 29, with support- ing data on rubber tree and plantation timber resources in Annexes 30/31. Tree cover of some form extends over about 80% of the land area although virgin forest covers only about 16%, and logged over forests about 4.4%. The great majority of tree cover remaining is forest fallow, defined as areas of generally low standing biomass, previously cleared, and now subject to shifting agriculture but with sizeable areas of commercial timber where forest cover has not been too severely disrupted. The mean annual increment of the current growing stock is estimated here to be about 21 MM m , although in computing this estimate it was assumed that most of the high density forest cover has minimal net annual primary production. Instead, the forest fallow, which is constantly regenerating from a sub-climax state, is more highly productive. Indeed the national rubber tree crop of 160,000 ha is responsible for about 9% of the incremental forest biomass annually. Due to its accessibility to urban markets this crop can be regarded as a major fuelwood resource. However, with such extensive forest cover, the mean annual increment of woody biomass is not a particularly relevant measure of how well the present and forecast demand for woodfuels can be sustained. Since the woodfuels generated in the process of harvesting commercial timber (necessarily con- stituting only part of the boles of trees) is at least as much again, the annual coupe provides an alternative approximation for the sustainable woodfuel yield from accessible native forest resources. By including the exploitable portion of forest fallow the commercial forest cover can be estimai-edat 3.9 MM ha, enabling an annual coupe of commercial timber on a 40 year rotation of about 2.0 MM m . Wo%3dfuel quality residues should be about double this volume, or 4.0 MM m . Combined with the annual woody biomass productio3 of rubber tree and timber plantations, the total becomes about 6.6 MM m . These quite different, and admittedly crude, estimates of annual sustainable wood'ael production take no account of the depletion of growing stock in the process of developing land for agriculture, or for urban and industrial development. Deforestation is, however, a significant and ongoing process in Liberia and the wood otherwise wasted in this process must be included in the woodfuel supply equation.

4.7 Deforestation i- occurring mostly through clearing for upland rice production and, according to the FAO, is responsible for the loss of about 65,000 ha of high forest each year, half of which is closed forest. Total forest clearing for smaLlholder upland rice growing is about - 67 -

180,000 ha per year, and generates about 23 MM m3 of wood waste annually. An additional 5000 ha of low lying forest is cleared each year for swamp and irrigated rice culture, and some 3000 ha for a combination of urbanization, timber plantations and commercial agriculture, giving rise to an additional million cubic metres or so of potential fuelwood. ihe current rate of biomass loss through forest clearing is about 24 HM m per year. These estimates of annual production of forest biomass, and of the biomass destroyed through forest clearing, must now be compared with estimates of present and future woodfuel consumption.

National Woodfuel Demand

4.8 An estimaLe of the 1983-1993 fuetwood demand for household cooking is provided in Annex 32. The 1983 household consumption for firewood and charcoal combined was estimated to be about 4.2 MM m3, and is forecast to grow to 5.9 MM m3 in 1993. The commercial/industrial consumption of fueLwood for heat and steam raising in 1983 was in the range of 30-35000 m 3 , or less than 1Z of household demand. While the industrial demand for fuelwood should grow, it is unlikely to exceed 2% of the. 1993 demand and can be regarded as negLigible by comparison. Therefore, the projected annual consumption of woodfueLs during the next decade is lower than any estimate of the sustainable yield of forest biomass assuming preservation of the existing forest cover. On the other hand the current rate of deforestation, amounting to about 2% of the closed high forest annually (see Annex 29), generates roughly four times the projected 1993 annual fuelwood demand in wood waste. From these data it can be safely concluded that there is no impending national crisis of voodfuel supply. However, a national overview quite often obscures serious regional deficiencies due frequently to the concentrated demand of large urban areas. For that reason the supply-demand relationship between Monrovia and its hinterland has been examined in some detail.

Supply and Demand of Woodfuels to Monrovia

4.9 Data on the pattern and level of consumption of woodfuels to Monrovia have been gathered by the Department of Energy in Liberia as part of the joint Oak Ridge National Laboratory/Government of Liberia (ORNL/GOL) energy assessment begun in 1982. The mission has accepted much of the statistical overview of household energy use that arises from the ORNL/GOL sample surveys of Monrovia households although, on the basis of a review of the survey met:iodology,and from observations of household cooking behaviour during ths mission, lower estimates of firewood consumption have been assumed here. The above-mentioned surveys produced an estimate of firewood consumption based on recall by interviewees of 3.6 kg/person/day. The GOL has accepted that this fig.re may be erroneous, hence the Bank mission has adopted a figure of about 2 kg/person/day. This more conservative estimate of firewood consumption obviously has the effect of reducing estimates of demand on fuelwood resources in Monrovia's hinterland, presenting a less constrained view of future supply than might actually be the case. Therefore, the mission recom- nends that a detailed longitudinal study of a relativeLy small number of - 68 - generalLy representative households, say 40-50 in all, be subjected to a careful weighed input survey in each season to provide a more solid data base for future woodfuels supply planning.

4.10 The mission's estimate of woodfuel demand for the city of Monrovia from 1983 to 1993 is provided in Annex 33. It is estimated that in 1983 about 50,000 te of charcoal and 90,000 te of firewood and residues or woody scrap was consumed in the city. This translates into 343,000 tonnes of wood equivelant (i.e. air dry wood, 252 moisture content on a wet basis-mcwb), and in turn, allowing for Iome supply of woody fuels within the city, to a demand of about 530,000 m (sv). This derand is expected to grow with the city's population to over 900,000 m in 1993. Currently about one third of this volume is rubberwood from plantations within perhaps 50 miles of the city. Host of the firewood is rubberwood and most of the charcoal is produced from native forest timbers, with the denser hardwoods strongly favored by producers. The mission surveyed markets in November and in February, ar,d found rubberwood charcoal to constitute about 20Z of the supply in the dry season and over 301 in the wet season (the latter from sampling inner city markets only). This resource selection implies clearfelling about 600 ha of rubber plantations (retired trees), and about 3,500 ha of closed high foresc annually at the current demand level. Utilizati n of the natural forest resource by charcoalers is poor; perhaps 100 mg of 250 m3 /ha, or 40Z of standing biomass, is converted to charcoal under the present method of carbonization. Once dried the larger logs remaining become difficult to cut, even with a chainsaw, and they either rot away or are burnt to make way for agricalture. With this pattern of use the natural forest within 50 miles radius of Monrovia is all but depleted, and it is now common for charcoal to be brought 70 miles or more from Grand Bassa and Cape Mount Counties. The current trend implies the loss of the equivalent of an additional 50,000 ha of closed canopy forest over the next decade. This trend has serious implications for economic supply of commercial timber to the urban-industrial market, and for the supply of presently accessible export quality timber. Similarly, if the present trend continues unabated, there may be significant real increases in the cost of charcoal for domestic consumption over the next decade. The first recommendation arising from these observations is to upgrade the record of "he rate of depletion of forest cover in the hinterland of Monrovia in order to for- mulate and support required forest management poLicies. However, there are several near term options for more efficient utilisation of existing woodfuel resources that deserve immediate attention. The first of these is increased utilisation of retired rubber trees.

Rubber as an Energy Crop

4.11 An estimate of the standing crop of rubber trees is provided in Armex 30. In 1983 the "national" rubber tree plantation was about 162,000 ha with one-third in large plantations, mostly under expatriate management, and two-thirds under small-holder plots averaging about 12 ha. Smallholder plots are more densely planted and when mature have substantially higher stocking rates than large plantations. The FDA - 69 - measured the volume, planting density and basal area of smalL-holder plots for the mission, and thIse data indicate an average standing biomass at maturity of 330 m /ha. The estimated annual incrementil production of woody biomass in the national plantation is 1.9 M m . However, we are concerned here with that part of crop that is readily accessible to Monrovia. The FDA used aerial photographs from 1979 to assess for the mission the area of smallholder rubber plots within a 50 mile radius of Monrovia plus that alongside major highways out of the city for 100 miles. This area was approximately 23,500 ha in 1979, compared with a total smallliolderrubber crop assessed by the Bank at that time of 111,000 ha. A'1 of the concession rubber plantations can be regarded in this context as accessible, giving a total of about 75,000 ha that appear to be available for exploitation as a fueL source. With a crop of even age distribution the average annual woodfuel csupe of this area of mixed plantation and smallholder plots is 760,000 m . If it is assumed that the average age of the crop is 17 years, and that there are adequate incentives to replant retired trees the annual coupe from the "accessible" crop through 1993 will be abo3ut1.2 MM mi. This voLume may be compared with the estimated 175,000 m now consumed as charcoal and firewood by households in Monrovia, plus industrial consumption for fuel and timber. It is not known precisely how much rubber tree wood is supplied to other urban and industrial markets, though using the Fire- stone company's own consumption as a guide to the internal consumption of the rubber industry, and with some preliminary estimates of fuelwood use bv the manufacturing sector, it is unlikely to exceed a further 125,000 -m, giving a total of about 300,000 m , or about 25% of the accessible resource. This finding has significent implications both for the rubber industry and for the protection of native forest resources.

4.12 First, if full use were made of senile rubber trees as fuelwood the pressure of woodfuel scavenging on the natural forest could be almost entirely removed. Currently, consumption of woodfuels other than from rubber trees is only 40Z of the volume of rubber tree wood estimated here to be available, and the total rubber tree wood available remains in excess of the Monrovia demand well into the 1990s. Second, it can be demonstrated that the commercial exploitation of retired rubber trees for firewood and charcoal production can at least partly finance the rehabilitation of the smallholder rubber industry. However, because of consumer preference for charcoal produced from dense high forest species the transition to a rubberwood dominated fuelwood supply will be difficult, though it is encouraging that supply from this source is already significant. In fact, the contractual arrangements already negotiated between charcoalers and rubber growers are highly beneficial to both parties, and the economic benefits cf this activity strongly favour the provisior.of government assistance to facilitate its expansion.

The Economics of Rubber Tree Wood Charcoal Production

4.13 It has been r;oted (para 4.10) that charcoal made from rubber trees comprises between 15Z and 30% of the charcoal supply to Monrovia. Private entrepreneurs pay smallholder rubber growers a dollar per tree - 70 -

for each tree harvested and carbonised. The FDA surveyed smallholder plots for the mission and establishedthat the average numbes of trees ner hectare was 495 and the volume per tree averaged 0.67 m . 4/ The return to the grower is not only in the form of this cash, but through saving the cost of poisoning,clearing and burning the old rubber trees in the process of replanting. The Bank/GOL smallholderrubber project identifiesthe costs of replantingas $2,270/ha(non-discounted) 5/ over the seven years to first tapping. The first year costs are $823/ha. Charcoalerspay one dollar per tree to growers for the right to make charcoal from senile rubber trees. In clearingthe trees for carbonisation the charcoalersreduce the cost of replantingby a further $321/ha (1983 dollars: costs of poisoningand clearfelling). This benefit and the cash paymentamounts to $816/hawhich is almost the entire first year cost of replanting,and greater than 35Z of the costs of establishment and maintenancethrough to production. Incentivesto exploit the wood fuel potentialof the rubber crop are also reflected in the comparative economicsof charcoalproduction. Table 4.2 summarisesthe economic and financial costs of charcoal production by traditionalmeans for both rubberand native forestwoods. While the financialincentives for charcoal producersfavour the carbonizationof forest wood, with returns to labour of about $1.60/day,compared with $1.40/dayfor charcoalerspro- ducing rubber tree charcoal.the economic costs of producingrubber wood charcoalare only marginallyhigher than the costs of producingcharcoal from forest wood. These data reflect the "in-forest" costs only. Becauserubber plantationsare closer to the market the cost of delivery per bag will be lower on average than for forest charcoal, giving the economic advantage at the margin to rubber tree charcoal production. With the use of modern metal kilns for charcoalproduction, the economic benefitsaccruing from the use of rubber trees as the fuelwoodare very substantiallygreater than from the exploitationof natural forests (see para 4.20).

4/ Plantingdensity ranges from 333-906 per ha. The range of volume of individualtrees is 0.54-0.83m .

5/ To arrive at this 1983 cost estimate, the 1980 costs provided have been inflated by 20% except for labor which remains at $2/day. Source: Liberia Rubber DevelopmentProject, Fu1l TechnicalReport, November 1980, WAPD, World Bantk. Table 4.2: CHARCOALPRODUCTION COSTS, LIBERIA, 1983 (per tonne of charcoalproduced in earthenkilns)

From Native Forest Fuelwood From RubberTree Fuelwood Financial Economic Financial Economic CapitalCharges Kiln 0 0 0 0 Tools 1.00 0.80 1.00 0.80 Fuelwoo9Resources al 0 12.0 13.33 -13.10 Labor a / --- 38 mandays---- 50 mandays- Fuelwood preparation b by chain saw 20.00 14.80 27.00 20.00 Packagingwicth begs and string 6.00 6.00 8.00 8.00 £rst per tonre of charcoal, 27.00 33.60 49.33 15.70 Cost per averapebag (M) E 0.46 (17 kg bags) 0.57 0.62(12.5kg bags) 0.20 Selling price in forest ($/bag) 1.50 1.50 1.50 1.50 Return to labor ($/day) 1.61 1.41 Cost of production at $2.00/manday i ($/tonne)d/ 103.00 109.60 149.33 115.70 a/ Native forest is the differencebetween 50 and 100 miles hauling distance in 5 tonne net trucks at 150/tonne km. Rubber wood financial cost derives from $l/tree and economic cost is credit for cleaning. bl Chain saw contractrats for about 31 stere/dayis about $1.00/stere. Forestwood is 600 kg/rn bd and rubberwood is 450 kg/m bd, hence the differencein costs for the same initialservice charge. c/ 5 times recycleof bags costing50f each U/ 28 mandays per kiln firingcompleted on a per tonne of charcoalbasis using 15X yield of charcoaland a 15 stere kiln. Source: Missionanalysis. - 72 -

Policy Implicationsand Recommendations

4.14 The mission has several recommendationsarising from this review of supplyprospects:

(a) ResourceInventory. The above analysisis based on assumptions which must be verifiedwith accurate up-to-dateinformation on the status of the rubber tree resource. The mission therefore recommendsthat a comprehensivesurvey of the rubber tree crop be undertakenas soon as possible. This survey should establish the presentarea under rubber trees in both the concession and the smallholdersector, along with the age and estimated remainirg commerciallife by specific location for each hold- ing. The objectiveof the survey is to providedetailed information on the availabilityof fuelwood from retired rubber trees on an annual basis through the next decade.

(b) Publicationand Promotion of Resources Available. The GOL should use the informationgained through the above resource inventoryto advertiseand promote the use of rubber trees for charcoalproduction in cooperationwith smallholders.Arrange- ments should also be made with the management of the Large plantationsector to allow the areas being cleared to be con- tracted to charcoalerson the same basis. In both instances the role of the governmentis to provide informationfor entrepreneurs seeking informationon growers prepared to contract for the carbonisationof their retiredtrees.

Cc) Credit Facility for Modern Kilns and Equipment. The mission also recommendsthe establishmentof a small credit facility for charcoalersutilising the rubber tree resourceas a result of a successfulnegotiation with a grower. The facility would be used for purchaseof metal kilns and associatedtools to improve the overall efficiencyof charcoal productionand hence to enhance resource recovery. The economics of metal kilnas versus traditional earthen kilns are examined below (para. 4.17).

Other WoodfuelResource Management Options

4.15 Significant-aste of fuel quality biomass is occuring in log- ging operations,sawmilling and in clearing for roads, infrastructureand timber plantation development. For example, in 1984 it is anticipated that about 300 ha will be clearfelledin the Cape Mount IndustrialPlan- tation area for the establishmentof additionalPinus planrations. The usable residuesof this clearingshould be at least 6,000 m , equivalent to 660 te of charcoal using traditionalkilns. The mission recommends that these wastes be systematicallyidentified and promoted to charcoal entrepreneursin the manner proposedhere for the retired rubber trees. Similarly,the use of these resourcesshould be encouragedby the extension of credit for modern kilns and tools to charcoalersagreeing to carbonisethese wastes. - 73 -

4.16 The commercial future of pLantations already established and proposed is in doubt. The existing plantations in the Bomi Hills and Cape Mount areas cover about 5000 ha, and were established largely for an export pulpwood industry that no longer appears viable. Some of the softwood species planted are not well suited for the production of char- coaL, although most should produce charcoal about the same quality as rubber wood Eucalypt and Gmelina sp. coppice, and could begin to be harvested for woodfuels. The investment in these plantations can be regarded as a sunk cost and the charge to exploit the resource should be merely to cover the management of the coppice rotation and fertilioers. These costs need to be identified though they are unlikely to exceed $300 per hectare which is about the royalty that could be recovered from charcoalers using the precedent already set by the privase sector in the carbonisation of retired rubber trees (assuming 200 m per ha recoverable volume). The economic benefit of substituting the use of these plantations for further clearfelling of native forest must be added to the direct cash receipts negotiated. These benefits are estimated at $12/te charcoal or $260/ha of plantation based on the marginal cost of additional transportation to deliver charcoal produced in forests at an additional 50 miles from the Monrovia market. The mission does not regard replanting costs as a valid approximation for the economic cost of deforestation in Liberia where forest resources are relatively abundant; however, there may be other, more accurate measures of the economic benefits of forest preservation.

4.17 The Cape Mount forests of 46,000 ha now reserved for plantation development must also be regarded as a potential resource for a managed woodfuels production programme. This forest is within 80 miles of Monrovia and has reasonable road cccess. In the very least charcoal production should be integrated with clearing and planting operations using the system of promotion and incentives proposed for senile rubber trees and the other woodfuel resources identified. One possible form of exploitation of this forest resource is for the production of charcoal for export. The economic viability of this option is discussed below (para. 4.21); however, the sustainable yield of this forest on a 25 year rotation is at least 25,000 te of charcoal/year, amounting to half the annual charcoal consumption of Monrovia per year, and representing a substantial expc-t volume in the context of regional markets. Although the costs of road access may prove prohibitive, the mission recommends that a preliminary feasibility study be conducted on the least cost method of forest management to yield high density charcoal on a sustainable basis from a long term rotation of the native forest. This option should be compared with clearing and replanting with fast growing short rotation fuelwood species. Ideally, selected carbonisation of non-commercial species and specimens should result in increased production and value of commer:ial timber. The study wuuld identify the economic cost of feedstock for Lharcoal production as an input to the evaluation of a managed program o5 charcoal production for export. - 74 -

The Charcoal Industry

4.18 The charcoal industry is almost entirely a private sector activity and appears to serve the market very efficiently. Although charcoaling is done by a Liberian version of the above-ground earthen kiln, and energy losses in conversion are high, the industry commonly uses chain saws to prepare wood for carbonisation, and the system of transportation and marketing is well organized. The industry appears to be comprised of a large number of small production units, some full time and others casually producing charcoal as the need for cash arises. These producers are served by chainsaw contractors who work for a daily fee plus petrol. It is evident from the fee structure reported that both the chainsaw contractor and the charcoalers obtain a reasonable return on their investment. The most capital intensive link in the supply chain is transportation to the market on behalf of producers or buyers. The dealers and truckers are the biggest units in the trade. Truckers and/or buyers offer to deliver charcoal to the city for a fee related partly to distance from the market or to buy and resell on their own account. Five tonne trucks are commonly seen pLying this trade. Trucks deliver charcoal either to a wholesale, or directly to a retail market. There is no monopoly in the trade; hence, very many arrangements for buying and selling apply. It is common to see up to ten tonnes of charcoal under tar- paulins or pLastic in informal marketplaces throughout the city. Re- tailers, commonly women, sell charcoal at these locations either in bag lots or broken down into about one pound weight heaps.

4.19 An estimate of the price build-up in the charcoal industry is provided in Annex 34. The ex-forest price is clearly negotiable and is as low as $1.00/bag at 70 miles from the market. Other costs vary on the arrangements applying with dealers and retailers, reflecting competition in the market. Retail mark-ups appear to vary between 15 cents and 75 cents/bag, though through observing the retail trade it is obvious that margins are improved by repacking heavy bags to gain an extra bag for every four or so, and that substantial margins are gained by breaking bags down into 0.4-0.5 kg heaps where the effective retail price per bag is as much as $3.90, and the margins increase up to about $2.40/bag.

Improved Charcoaling Efficiency

4.20 Charcoal production by traditional methods is probably no more than 15% efficient (22% energy conversion efficiency). 6/ A modified version of the portable metal kiln - the ghana kiln - appears to be the most suitable alternative to the Liberian earthen kiln. This kiln offers a conversion efficiency of 25% which is 60% greater than the earthen kiln. Its management is easier and the charcoal produced is of uniformly

6/ The measure of efficiency in charcoaling is the proportion of charcoal produced tc the oven dry weight of the wood charge. - 75 -

high quality. The kiln capacity is 6.5 steres, compared with at least 15 steres for the traditional kiln. Due to higher efficiency and mucb reduced charcoaling times, the rate of production is about three times that for earthen kilns. In effect, a three man charcoaling team being supplied by a chain saw contractor using three metal kilns will produce from native forest timbers about 110 te charcoal annually as opposed to a maximum of 40 te from two 15-stere earthen kilns. The costs of charcoal production with this kiln are provided for both rubber wood and forest species in Table 4.3. The financial costs of production with the metal kiLn are about 40Z of those with earthen kilns assuming a daily wage for labourers of $2.00. Providing adequate credit were available to producers to purchase metal kiLns, the incentives to utilise them are substantial. The maximum cost of three metal kiLns is $3000, and the anticipated life is five years. The improvement in economic benefits of utilizing these metal kilns is about the same as for financial benefits though it is noteworthy that the economic costs of production of rubber tree charcoaL are greatly reduced, confirming rubber trees as the least cost source of charcoal. The mission therefore recommends expansion of the demonstration project for the modified metal kilns, with a certain number donated to charcoal entrepreneurs, and establishment of a source of credit for their purchase in line with the recommendations above to provide incentives for the carbonization of fuelwood resources with the lowest opportunity cost. The Partners for Eroductivity project should serve as the basis for the expanded program.

The Prospect for Exporting Charcoal

4.21 The Cape Mount forest resources now delineated for the development of industrial pulpwood plantations could possibly yield 25,000 te or more of charcoal per year over a long period and this may offer a resource base for a charcoal export trade. An estimate of the export price of charcoal is provided in Table 4.4. With the assumptions applied in the cost estimates, the CIF price in Senegal or Mauritania ports is between $150-$175!te. The most critical assumptions in this estimate are that the exporter owns and operates the transport to Liberian ports and that shippers will charge per unit weight and not volume. The latter assumption is vital to the viatility of the trade as charcoal has a maximum bulk density of 300 kg/mr in bags, hence charging by volume would result in a shipping cost of $150-$200/te. There are precedents from other parts of the world for charging charcoal shipping on a weight basis, though this is clearly a matter for negotiation. This cost and pricing estimate also assumes that the trader has sufficient capital to invest in trucks, and preferably his own metal kilns and forest-based charcoaling gangs, and that he has adequate working capital to establish the trade. Capital requirements will be on the order of $300,000-400,000 to initiate a 5000 te/year trade, depending largely on how the trade is structured, and the efficiency of transportation. The mission under- stands that charcoal prices are on the order of $200/te plus in the main ports of Mauritania, suggesting that adequate margins may exist for a trader at the retail end. The mission therefore recommends that a detailed study of the costs and logistics of this trade be undertaken, and - 76 - that this study include the provision of risk capital for trial shipments to the preferred target markets.

Table 4.3: CHARCOALPR1DOUCTION COSTS IN LIBERIAUSING IMPROVEDMETAL KILNS (pertonne of charcoalproduced in metal kilns)

From Native ForestFuelwood From RubberTree Fuelwood Financial Economic Financial Economic

CapitalCharges Kiln a/ 6.10 4.30 8.40 5.80 tools 1.00 0.80 1.00 0.80

FuelwoodResource Costs b/ 0 12.00 13.33 -13.10 Labor c/ -- 6 man days - 8 mandays ---

FuelwoodPreparation d/ by Chain saw 12.00 12.00 16.00 16.00 Packagingwith Bags and Stringe/ 6.00 6.00 8.00 8.00

Cost per tonne tS) 25.10 35.10 47.73 17.50 Cost per averagebag (S) 0.43 0.60 0.60 0.22 (17 kg bags) (12.5kg bags) Sellingprice in forest (S/bag) i.50 1.50 1.50 1.50 Returnto Labor ($/day# 10.52 (8.85) 9.28 (12.81)

Cost of Productionat 32.00/man-day(S/tonne) 37.10 47.10 63.73 29.50 a/ Financialcost of a "Ghana"metal kiln is 51,O0 and the economiccost 5750. Life is 5 years and discountrate for capitalrecovery is 10%. Volume is 6.5 steres,yield is 25% and firingsare 80 per year. Rubber wood is 450 kg/mr bd; Forestspecies are 600 3 kg/r bd. b/ as per Table 4.2. c/ Labor is based on one man/kiln/daywith two kiln operations. d/ as per Table 4.2. e/ as per Table 4.2. Table 4.4: POSSIBLECHARCOAL EXPORT PRICE STRUCTURE,LIBERIA (USS)

Per Bag (of 17.5 kg ave) Per Tonne Coment

ContractPrice ex-forestin Cape Mount or Grand Bassa Countries S0.63-1,0 S37.15-57.14 - Rangingfrom production cost with metal kilns (seeTable 4.3) to currentlowest ex-forest price. Economiccost of deliveryto ports of Monrovia 0.25 14.25 - Could be lower. Cost is full cost of owning and operating10 tonne net capacitytrucks.

Net Cost of Bags 0,20 10.80 - Assumesabout 3 returnsor rice bags. Multiwalled,one-way, I cardboardbags may be desirable. 14 '.4 Port storageand loadingcharges 0,20 10.80 - estimateonly. I

FOB cost 1.61-1,65 73.00-92.99

Possibletrader markup (20%of highestFOB cost) 0,33 18.57 - dependson cost of establishingand operatingthe trade.

FOB price 1.61-1,98 91.57-111.56

ShippingCost 0.88 50.0 - Assumesshipping on weightbasis In 500 + tonne shipments

Insurance 0.04 2.50 - estimate only

Port HandlingCosts ForeignPort 0t18 10.00 - estimateonly.

CIF price S2.71-3.08 5154.07-174,06 - 78 -

Modifying Demand for Household Cooking Fuels

4.22 The majority of cooking is done on open fires either using the traditionaL "three-stone" method of pot support, or metal pot stands of various designs. However, most of this type of cooking takes place in ruraL areas where there is an abundant fuel supply and no financial incentive to economise on fuel use. With urbanisation there is a sharp transition to charcoal cooking and hence to the use of charcoal stoves. Of course, charcoal is traded for cash and at current prices there may well be incentives to reduce the amount of fuel required for daily cooking. The mission concentrated its review of cooking efficiency, therefore, on potential improvements in the fuel economy of charcoal stoves. Stoves of Liberian design in common use were tested in a laboratory using locally aquired aLuminum pots of typical dimensions. These tests revealed an average efficiency of heat utilisation of 24%, quite similar to charcoal stoves of traditional design in other African countries. This need not indicate a prospect of improving the overall fuel economy of cooking with charcoal for this will depend on the management of the charcoal fire throughout a typical cooking cycle. However, observations of cooking behaviour by the mission suggest that significant improvements in fuel economy can flow from the use of stoves designed not only to effect a greater transfer of energy at a certain power output but to reduce the size of the charcoal charge by reducing the size of the firebox. The present stoves permit a Large amount of charcoal to be installed at the beginning of cooking, and the same amount seems to be loaded by housewives almost regardless of the cooking task. Certainly no unburnt charcoal is removed at the end of the cooking cycLe. The cost savings anticipated from cooking with improved stoves are quantified in Table 4.5, which indicates that a 20-30% reduction in cooking costs is possible if efficiency data are indicative of ultimate fuel savings. The mission therefore recommends the trial of charcoal stoves known to have higher efficiency and which are now available elsewhere (e.g., Kenya), to establish both consumer preferences and the actual fuel economy of these and the local stoves in the course of normal cooking cycles.

4.23 The next most common household cooking fuel in the cash economy is kerosene. The great majority of kerosene stoves in use are the Chinese single wick type which have an efficiency of about 40% when new, though wick maintenance is difficult and is usually neglected, giving rise to efficiencies of 30% or less. The most recent models of Indian multiple wick stoves such as the Ashok 10 wick stove yield efficiencies of 45-50% and have easier wick setting and maintenance procedures. Simi- larly, kerosene pressure stoves of the Swedish and Korean variety have efficiencies in the range of 50-57%. Based on che ratio of efficiencies established, the anticipated reduction in the cost of kerosene cooking is about 25-35% (see Table 4.5) with improved stoves. The mission recommends that traders be encouraged to import multiple wick and pressure type kerosene stoves of high efficiencv for which reliable test data already exist. The government should promote these stoves to importers and then advertise their advantages when the choice is available to the consumer. Table4.5: COST OF COOKINGIN LIBERIAWITH PRESENTAND IMPROVEDSTOVES

TotalCost Cost of Fuel AnnualCost AnnualFuel of service per unit Cost per ConversionCapital Cost including use per unit energy Fuel and StoveType sold unit energy Efficiency of Stove malntenanceb/ Stovec/ utilized (#/MJ) (PHUa/) (S)

Charcoal Liberiantraditional design 2,50/ 0,48 24 2.00 1.15 890 kg 2.00 sackof (2 yr life) 17.5kg (av.) Kenya Jlkoor Thailandbucket type 30 4.0 1.60 743 kg 1.60 (3 yr life) 35 1.37 Kerosene Currentmodels sold in Liberia(Chinese single wick type) 2,35/US 1.69 35 33,50 21,30 497 litres 4,95 gallon (2 yr life $20+M) IndianMultiple wick Type 48 17.00d/ 11.80 362 litres 3.61 (2 yr life S20#M) Swedishor Korean pressure(primus) type 54 45.00e/ 18.00 321 litres 3.28 (2 yr life, no wIck) a/ Conversionefficlencies or percentageof heat utilized (PHU) are based on mission and Eindhoven Stove Group Measurements,Kenya charcoal Jiko has been measuredat up to 36% PHU by ITOG. b/ Discountrate Is 10% for capitalrecovery, c/ Familyof five,350 day per year service. d/ Pricebased on same markupover Asianmarket prices observed for Chinesewick stove in Monrovia, e/ Retail price In Holland,though similarstoves of German and Sovietmanufacture sell for S9-S20 In equallydistant markets. Source: Mission estimates;Eindhoven Stove Group for WorldBank. - 80 -

Kerosene and LPG Supplies

4.24 Since the cessation of refining in January of 1983 there have been occasional shortages in the supply of kerosene and particular difficulty in procuring LPG. The latter is desired almost entirely as insurance against power outages, which have been frequent and which are widely anticipated to continue into the next dry season (Jan-Apr. 1985). The LPG market is so small that lower cost supply is unlikely even if the present demand grows to one of primary use rather than just to back up electricity. Nevertheless, Senegal is reported to be offering LPC supply in bottles at reasonable prices from its refinery, hence the LPRC should investigate imports from that source. Kerosene will remain an important energy source for lighting even if its use for household cooking is constrained by supply and relative price. Price and supply constraints appear to apply only to Monrovia and its immediate hinterland. Outside of this region kerosene from the Ivory Coast, amounting to perhaps 6-8 MM1 per year, is at least 20% cheaper, though the trade is unrecorded. This supply appears to be secure and will presumably be maintained at a margin below the cost of the competing source from Monrovia, although there may be some lag time in making up for substantial short term deficiencies in supply to Monrovia, should they arise. The mission believes that this informal supply arrangement is desirable, and recommends only that an attempt be made to quantify the volume of the trade at the border between the two countries.

Solar Water Heating

4.25 Superficially, the prospects for solar water heating appear good. Power tariffs are at 15 cents/kWh, and the SRMC of electricity during the dry season is 18 cents/kWh and usually solar water heating can be justified at and above 8 cents/kWh. However, the market in Monrovia is a maximum of 4,000 households, each of which consumes 150 kWh or more per month for electric water heating. The economic benefits of serving this market are substantial in that as much as 5 MW of peak capacity may be utilised by water heating, and capacity is now severely limited Similarly, for the private consumer the payback on a 200 litre, 2.2 m solar collector costing $800 installed is less than four years, and the security of service compared to the current reliability of power supply is excellent. Despite these prospective benefits the mission is unable to recommend that the LEC finance and manage a retrofitting program for the households concerned. For the t.'me being, the LEC is unable to enforce payment, to satisfy the consumer that it is charging only for the amount consumed, and to adequately organize its own accounts. Hence consumers will have to perceive the benefits of solar water heating for themselves, and find the required initial capital. The mission suggests either that the GOL promote to householders the benefits of their own investment in solar systems, and ensure duty free access for solar water heating systems, or that an alternative vehicle for credit be established to enable householders to overcome the first cost barrier. For economic - 81 - reasons, it is desirable to limit the demand for installed capacity on the LEC power system by ensuring that electrical back-up on solar systems is limited to 1kW, and that electrical supply is manually initiated and thermostatically terminated. This may be achieved by a tax or import duty fixed per unit of kW of back-up.

Industry

4.26 In the industrial sector the mission reviewed prospects for imr provements in the efficiency of energy use in manufacturing and for tbho substitution of woodfuels and direct solar radiation for petroleum fuels in heat and steam raising. In addition a review was made of the economic viability of supplying the Bong Mine with fuelwood as a substitute for a significant proportion of the fuel oil currently used to dry iron ore for export. Visits were made by mission specialists to the most energy intensive manufacturing plants in Monrovia, to the Bong Mines, and to the representatives of the major rubber producers. The Bong Mine is the most energy intensive industrial undertaking in Liberia and had, by the end of 1983, completed most of the financially justifiable measures to improve process energy efficiency. Similarly, almost all of the obvious and financially attractive measures to save fuel in the manufacturing sector have either recently been implemented or are committed. The mission concluded that there is little additional scope for further substitution of diesel and fuel oil or electricity with fuelwood in the manufacturing sector. However, there is an important economic prospect to substitute fuel oil with fuelwood at the Bong Mine and this option is discussed further below.

Energy Efficiency in Manufacturing

4.27 The brewery represents a good example of recent initiatives to improve energy efficiency in the manufacturing sector. Just through general belt-tightening it has reduced its electricity consumption by 24% on an annual basis during the last year. In addition, by installing a new heavy fuel oil-fired boiler, the brewery not only saved the differential in price over diesel but it reduced its overall oil use in steam- raising by about 32%. Similarly, the Firestone Company has reduced its electricity consumption by 12% by reconfiguring its process with the use of steam for the preparation of rubber concentrate. Hotels are candi- dates for energy conservation, though currently with low occupation rates, major investment in new equipment for improving energy efficiency is out of the question. Only relatively small efficiency improvements are possible without capital investment. In summary, for fuels other than electricity the economic prospects for major gains in energy efficiency appear poor, and the mission believes that further attention by the government in this area is not of high priority. - 82 -

Interfuel Substitution in the Manufacturing Sector

4.28 There has been a surprising amount of interfuel substitution undertaken in the past two years motivated by the increasing price of petroleum products. Among the major rubber producers, both Firestone and Guthrie have converted their electric or diesel rubber processing plant to wood-fired steam boilers using retired rubber trees from their own clearing and replanting program. Firestone's 11,000 Lb/hr steam boiler consumed 35 ce wood per day until March 1984 and is now consuming 50 te/day to provide for 24 hour operation of the processing plant. Simi- larly, five of the city's eight bakeries are operating on wood from retired rubber trees. The mission examined the prospect for large scale industrial solar water heating plant both in the manufacturing and hotel industries anid found that investment here would show only marginal economic returns, and would be financially unattractive. For example, the John F Kennedy hospital is being refurbished with heavy fuel oil burning boilers which is the least cost option for low grade heat production at present fuel oil prices considering the boiler investment is a sunk cost. The largest serviceable hotel in Liberia, the Ducor Palace, uses steam boilers rather than electricity for water heating and although these could be suppLemented with solar water heating the occupation rate is tow and the investment requirements substantial. The major power load in hotels is for air-conditioning and this subject is dealt with in Chapter III. For the estimated 800 beds of hotel capacity in honrovia conversion to solar water heating would provide a net savings of 27.5- 55 MW hr per month, or $50,000-100,000 per year compared with an investment of the order of $500,000. The mission believes that investment in large scale solar water heating is a very low priority in the context of other energy sector investment needs. As noted above there has been a most desirable substitution of diesel with fuel oil in steam raising in local industry and commerce. However, one anomaly that deserves attention is the use of about 300,000 liters of kerosene per year as a boiler fuel by the local soft drink bottLer. Contrary to the impression held by plant management, the mission finds that kerosene can be replaced oy diesel in the existing boilers without difficulty, resulting in an immediate saving of about 10% in fuel costs at current ex-depot prices. Moreover, fuel oil could be used with only minor investment in fuel handling systems and a further cost saving of 30Z would accrue. Thus, the mission recommends that the Department of Energy promote this benefit to the industry concerned. Finally, the mission reviewed the prospect of using rice husks to displace diesel in rice drying at small rice mills. It was found that, of the 32 mills in operation, 29 are very small and buy rice already sun-dried by growers. The remainder use diesel driers but have a throughput of only 3 tonnes of rice per day on average, making investment in rice hull burners at present uneconomic.

4.29 In 1983 the Bong Mine Company (BMC) advertised a request for proposal for the supply of 100te of wood per day yearround. The response to this proposal was poor, with prohibitive delivered prices being offered. In discussion with the BMC it became clear that neither the company nor Liberian entrepreneurs fully understand the use of wood as a - 83 - fuel or the economics of its supply from a forest resource. Since the BMC had initiated the proposal due to the increasing proportion that imported fuel made of its cost of production and, moreover, had satisfied itself through combustion trials that fuelwood could be integrated successfully with the fuel oil combustion system, there was a prima facie case to re-evaluate this option with the benefit of more accurate cost data. The BMC imported about 25000te of fuel oil just for drying iron ore in its pellet mill during 1983. The minimum delivered cost of this oil was $188/te, amounting to US$4.7 million/year. Currently BMC pays for this oil with foreign exchange earned offshore as payment for its ore. This foreign exchange is not available to the government; hence, any conversion of fuel oil to local fuelwood as a source of heat for drying ore will result in a net increase in the supply of funds to the economy. The absolute size of the oil bill for this end-use is significant in the national context, making the evaluation of this option for interfuel substitution all the more important.

4.30 The quantity of wood tendered was 36500 te annuaLly, which is the equivalent of 12500 te of fuel oil (at 14.3 MJ/kg wood of 25Z mcwb) or half gf the fueL oil used in the drying proces. This computes to 55,000 m of wood at a basic density of 500 kg/m oven dry. In the process of analysing in detail the economic prospect of a wood-fired power supply to the Monrovia grid the mission established the costs to harvest and deliver wood from the available resources. The annual requirement the BMC have notified can readily be met from the existing 4000ha of predominantly, Gmelina sp. plantations in the Bomi Hills (see Annex 31). The mission's estimate of the cost of harvesting and deliver- ing Gmelina wood to the roadside is $7.42/1m(sv). Regrettably, the Bong Mine is on the other side of the St. Paul River from the plantations and there is no bridge in that region. This means a total transport distanice from the plantations to the mine of 160 km. There are also abundant rubber tree resources in the region of the mine that will have to be considered in any final proposal for fuelwood supply, but for the purposes of this evaluation the mission has chosen to assume that only the most remote and certain supply source is available. World Bank staff have estimated transport costs for all classes of roads and vehicles, including depreciation, at 6 to 7 cents per tonne kilometre for the class of road that would be traversed to supply this fuel. The maximum costs are those applicable to heavy trucks utilizing largely earthen roads, and these are about 9 cents/te.km. The mission applied 12.5 cents/te.km. as a conservative estimate of the cost structure, including return on capital for a private trucker, in analysing the delivered cost of fuelwood. A fee of $2.50/te max. is included in the "ex-forest" costs to provide FDA with funds for plantation maintenance. A stumpage fee is not applicable as the resource has no opportunity cost. This FDA charge is almost the same on a per tonne basis as that negotiated between rubber producers and charcoalers. The delivered cost of fuelwood thus computes to about $30/te. This must be compared with the breakeven cost with fuel oil. - 84 -

4.31 In their trialsof fuelwoodcombustion in the existingburners, BMC engineersnoted about 10-15Z loss in combustionefficiency for the wood component. Allowing for this the breakeven cost of fuelwood delivered to the mine with fuel oil on an energy equivelant basis is $51/te. Making allowance for comminution,handling and storage costs estimatedat $5Jm3, the breakevencost at the point of combustionappears to be about $48/te. In order for the trade to be profitableto an entrepreneur, a suitable margin over full economic costs will be necessary. At $5/te the delivered cost becomes $35/te or about 60% of the breakeven cost. If this price were achieved the BMC would save US$l million per year, and Liberia would see, in effect, the repatriation of about US$1.3 million per year. There is considerable evidence that these cost estimates reflect the actual experience of costs for a trade of this nature in Liberia today. First, in the past year Firestone Co. has been re- questing tenders for the delivery of 35-50 te/day of rubberwood from bulldozed retired plantations for its steam boiler. The current winning tender was for $9/te delivered over about 15 km. A local contractor had supplied the company up until March for $14/te. The implied transport component of these delivered costs is very cLose to our estimate of economic cost. Second, eytrepreneurs supply Monrovia bakeries with wood in small trucks (about lOm loads) from over 70 km for about $40/te.

Risks and Logistics

4.32 The BMC have so far refused to consider a supply contract of more than a year's duration for fuetwood. However, the initial capital requirementsof an entrepreneurto undertake this business is at least $750,000 for supply at the level of 36,000 tonnes per year. It is incon- ceivable that an entrepreneur will take up the supply contract without the security of a longer term supply contract. Clearly, some form of risk capital is required to alleviate the risk that the BMC will close within five years of the start of fuelwood supply. The mission believes that the economic benefits of this fuel oil substitution program are potentially so significant that a detailed feasibility study should be undertaken as a matter of priority. This study would identify the full costs to BMC, the capital required by an entrepreneur, the least cost fuelwood resource, the Logistics of supply, the economic and financial benefits likely to apply to all parties, and possible arrangements to alleviateunreasonable risk to the private sector participants. It may be desirable, for example, to initiate the business on a smalLer scale. The study could be completed for about $40,000 by the end of 1984. - 85 -

V. INVESTMENT, INSTITUTIONAL ARRANCENKETS AND NANPOIMR

Energy Sector Investment

5.1 Since the early 1970s Liberia's Public Sector Investment Pro- gram has been about 10-15% of GDP and energy sector investment has been around 3-5% of that. Energy sector investment has been almost synonymous with power sector investment, although it is clear that there have been investments in the refinery by the COL through the LPRC after 1978 that have not been recorded as part of public sector investment. Table 5.1 summarises energy investment as a proportion of public investment since 1976 and projected in 1983 through 1987. Public sector investment planning was initiated on a four-year plan basis in 1976 with the first plan in 1976180, and the second plan made initially for 1981/82-1984/85 but revised due to resource shortages and generally declining economic production to extend for six years covering the 1981/82-1986/87 period. There is no energy sector investment planning per se but rather a com- pilation of plans proposed by parastatals and others by the Ministry of Planning and Economic Affairs. The mission has, therefore, compiled the GOL energy sector investment from various line items in other development expenditure categories. The lack of investment programming by a focal point for energy planning within the administration, such as an energy planning unit, is a serious deficiency which must be rectified if a balanced and rational energy sector investment program is to be prepared and implemented. In the first two years of this period, 1981/83, the share of energy in total public sector investment was about 202 because of the installation of major power generation pLant and considerable investments in petroleum exploration, product storage and refinery equipment. The COL's revised public sector investment program calls for an investment of US$1.1 billion over the six years concerned, with US$903 million to be spent between 1983 and 1987. Of this, energy sector investments comprise about 3.6% amounting to about US$39 million. Table 5.2 outlines the pattern of energy sector expenditure made and proposed in this present plan period. For the remainder of the plan, investment is 98% for power sector development, both in the MPS and in isolated power systems. This investment plan may be contrasted both in specific detail and in scale with what the mission is proposing subsequent to the energy assessment.

Table 5.1: OVERVIEW OF ENERGY INVESTMENT IN THE PUBLIC SECTOR, 1976-1987

1976/80 1981/83 1983/87 Total public sector investment 583 198 903 Estimated average X of CDP 15.0 9.4 - Energy investment, actual and proposed 22.2 39.7 39.3 Energy investment as % of pubLic investment program 3.8 20.0 3.6 Source: COL and mission estimates. - 86 -

Table 5.2: AVERAGEANNUAL COMPONENT OF PUBLIC INVESTMENTPROGRAM BY SUBSECTOR,1981-1987, ACTUALAND PROJECTED CUSSmillion)

GOL World Bank Energy Actual Progr6m --- Assessment MWsslon

A. Electric Power 1981/82 1983/87 % 1983/87 % 1984/93 5 1. Monrovia Power System 16.2 6.8 69 11.0 7t.6 9.6 79 2. Isolated Power System 0.1 2.9 29 0.4 2.6 0.7 6

B. Petroleum 1. Refinery/Petroleum 2.0 - - 1.6 17.1 0.8 6 Storage and Handling 2. Exploration 1.5 - - - -

C. Household and IndustrialEnergy - - - 0.3 1.8 0.5 4

D. Technical Assistance 0.2 0.2 2 1.0 6.9 0.6 5

Total 20.0 9.9 100 14.3 100.0 12.2 100

x of Public Investment Program 20.0 4.3 5.9 10-15

Source: GOL and mission estimates.

Revised Energy Sector Investment Program

5.2 The mission's recommended energy sector investment program is contained in Annex 35 and provides a year-by-year breakdown of investment by subsector for both capitaL investment and technical assistance. These investments are summarised in Table 5.2, which compares in average annual terms the mission's investment program with that proposed by the GOL over the period 1983/84-1986/87, and further compares investment in the short term with that for the entire 1984/93 period. The mission sees the need for 40X higher energy sector investment in the short term and a$%out 20% higher on an average annual basis over the longer term above that proposed by the GOL. GeneraLly, the GOL program excludes investment requirements in petroleum supply, and in the household and industriaL energy subsectors, whereas the mission has identified important investments in these areas. In addition, the GOL plan largely ignores technical assistance to the energy sector in the form of pre-investment work and the supply of skilled manpower. Despite the identification of a more diverse investment program, the mission proposes substantially higher investment in the power sector in absolute terms over the next three to four years. Here again, the mission's proposals reflect an urgent need to invest in rehabilitation of the MPS, and a recommendation not to invest - 87 -

further in power supply to small towni until major tariff, metering and billing reforms are installedand enforced (see 3.33). The GOL program implies a share of about 4X and the mission's program 6% of the public sector investmentprogram target for the extended plan period specified by the COL to the Donors Round Table meeting in October 1983. This investmenttarget equates to about US$180 million a year, whereas it is unlikely in present economic circumstancesthat a public sector investment program of more than US$100 million per year will be possible. This implies energy sector investment of between 10-15Z of public sector investmentover the next decade. Although this Level of investment is entirely desirablethere are prioritieswithin the program for the use of inevitablyscarce resources.

InvestmentPriorities

5.3 A list of the top priorityand high priorityenergy sector investments is provided in Table 5.3. This list is intended to assist the COL in determiningwhich of the many proposalsfor investmentand technical assistance to begin under the pressure of extreme competitionfor developmentfunds. A total of $18.5 million in projects, pre-investment work and managementcontracts is requiredurgently, and will further define and prepare for an additionalset of high priority investmentsten- tativeLy estimated at US$54 million. The foreign exchange requirement for this componentof the investmentprogram is approximateLyUS$60 million. This raises the question of the source of funds to finance,at a minimum, the prioritycomponents of the energy sector investmentprogram. - 88 -

Table 5.3: MAJOR NEW INVESTMENTSBY PRIORITYCLASS (US$ miLlion 1983) EstimatedTotal Cost Projectsin Program for 1984-93 1. Top Priorit (to be ini'tiatedn 84/85) Power Sector Distributionand generation rehabilitation(MPS) 10.20 Meters 1.40 Rural distributionand meters 0.90 Mana*ementand distributionmetering and billingreform contracts 3.50 IndustrialSector BMC fuel1oodsupply and TA 0.85 HouseholdSector Charcoa1kilns. rubberwood resourcesand charcoalexport studies 0.40 PetroleumSector Managementcontracts and engineeringdesign for petroleumhandling and storage 0.80 Total 18.05 2. High Priority (to be initiated1984-1987, pending negotiations, comprehensivepower systemplanning, and detailedpre-investment work)

Power Sector (indicativeprojects pending least cost plan outcome) Slow speed dieselsa/ 16.20 Mount Coffee additionsa/ 19.00 Robertsfield,Totota anl BMC exchange transmissionand relatedwork 11.00 PetroleumSector PetroLeumhandling, storage and depot re-arrangementand rehabilitation 7.50

o Total Priorityinvestments 71.75 o Estimatedforeign exchange requirement 60.00 a/ May be influencedby outcome of Via Storage/Mt.Coffee upgrading study of Stanley-Harzagroup, and recomended planningstudies. Source: Missionestimates and review. - 89 -

Source of Funds

5.4 The proposed energy sector investment program is comprised mostly of power and petroleumsupply projects and technicalassistance. Historically both West German and OPEC/Saudi Fund grant or soft loan monies have been suppliedfor power projects,and the World Bank has also been a major power sector financier. Currently the AfDB has approved almost US$20 million for LEC tranmissionprojects, as discussed in para 3.31. It is reasonableto expect an ongoing interest from most of these financiers. USAID have also indicatedan interestin fundingsmall rural electrificationprojects and have funded a small village level micro- hydro plant currently under construction. USAID are also committed through 1985 to support their own energy assessment initiative,but it appears unlikely that major new sources of grant assistance will be forthcomingfor energy sector projectsin the near future. Assuming that the AfDB is prepared to consider some re-allocationof funds within the recently signed loan with the LEC, there is a shortfaLlof about US$40 million in foreign exchange for projects that should be financedwithin four years. It is most unlikelythat these funds can be supplied totally from grant and soft loan sources and there is strict and essentialcon- trol on the rate at which new commercialdebt is subscribed. In effect, if the energy sector investmentprogram is to be implementedit will have to be substantiallyfinanced from internal revenue. This is completely conceivablegiven the highly advantageousposition of both the LEC and the LPRC of monopoly control and with their energy prices well above economic costs. It will be recalled that by 1986 the LEC can turn a profit exceeding US$8 million annually, and that the LPRC can cut its annual costs of supply by at least US$10 million with relativelystraightforward reductions in costs and improvementsin management practice. In any case, without some significantimprovement in the financial performance of both major energy parastatals,donors and multilateralaid agencies will look askance at funding large new projects. This perspectiveon financing the energy sector developmentbudget strongly reinforces the policy measures proposed by the governmentwith respect to reform within the LEC and the LPRC, and makes it clear that the GOL's key, and perhaps only, means of undertakingthe required energy investmentprogram is to help itself in order to get help from others.

Energy Planning,Institutions and Manpower Needs

InstitutionalArrangments

5.5 Manpower, institutionaland planning issues specific to the petroleum and power subsectorshave been addressed and recommendations made where appropriatein ChaptersII and III respectively. This section reviews the existing arrangementsfor energy policy and planning within the governmentand for the energy sector as a whole. The GOL implicitly recognizedthe importanceof an integratedapproach to energy sector management and developmentin 1981 when it establishedthe National Energy - 90 -

Committee (NEC) as a high level body comprised of Ministers and heads of energy sector parastatals under the chairmanship of the Minister for Lands, Mines and Energy. However, the NEC was not accorded any real decision-making powers or significant administrative resources and soon after its original members delegated their responsibilities to lower level staff. Similarly, in October 1981, the statute of the Ministry of Lands, Mines and Energy was amended by decree of the Head of State to establish a Department of Energy within the Ministry, and more recently the head of this department has been made an Assistant Minister. There is no mandate governing liaison between the NEC and the LEC, LPRC and other energy related agencies in respect of reviewing their investment plans, pricing proposals or corporate policies, hence, for the most part the NEC and the DOE is bypassed by the management of the implementing agencies. Until recently the Ministry of Lands, Mines and Energy was not represented on the boards of the energy parastatals, although in December 1983 the Minister has been made Chairman of the Board of the LPRC. Finally, during the course of the last year, day to day management of the economy has been vested with the Economic and Financial Management Committee (EPMC); a body which includes the Minister of Planning and Economic Affairs, the Minister of Defence, and key departmental heads, under the Chairmanship of the Minister for Finance though, despite the pivotal importaDce of the petroleum and power sector performance to the economy, neither the Minister of LME nor the Assistant Minister for Energy is represented. In effect, then, the NEC and the DOE are isolated from the mainstream of decision-making and authority in the GOL and are, as a result, quite ineffective.

Energy Planning

5.6 Despite its lack of real authority the NEC, with the DOE as defacto secretariat, made impressive attempts to develop a more comprehensive understanding of issues and options in the energy sector during 1982 and 1983 in the context of the GOL/ORNL energy assessment (phase 1) supported financially by USAID. A valuable set of historical data and a description of the then operating conditions of each subsector of the energy economy was developed with the enthusiastic co-operation of com- petent mid-level staff from a number of departments and authorities. In the same process valuable reviews were made of plans in the petroleum and power sectors in the context of independent demand forecasts. Although this effort had not cuLminated in sector wide investment plans and policies, considerable groundwork had been laid for some of the more searching analyses that this mission has been able to undertake, and the capability of GOL staff to contribute to energy planning has been well demonstrated. However, largely because of the lack of clear mandates and weak links with real authority in the GOL the NEC has become merely a forum for occasional discussions, and enthusiasm among previous participants to contribute to it further time and resources has waned. The mission regards the NEC as having served a valuable role in bringing to the attention of Government the importance of energy to economic development and in raising critical issues of subsector mismanagement. However, the required transition to a fully fledged permanent energy policy and - 91 - planningadministration should be completed. The mission therefore recommends that the Departmentof Energy be greatly strengthenedand the NEC be dissolved. Presentlythe responsibilitiesof the Department of Energy are confusedwith those of the Bureau of Hydrocarbons,which in many respectscan be regardedas its predecessor. The responsibilityof the Bureau is to ensure thoroughevaluation of the potentialfor economic developmentof petroleumin Liberia;a matter requiringskilled technical inputs,and one not to be conftsedwith overallenergy sector policy and planningcoordination. The mission thereforerecommends the formationof an energy policyand planningdivision within the DOE quite separatefrom the Bureau of Hydrocarbons.

Role of an Energy Policyand PlanningDivision

5.7 The energy policy and planning functionshould not be confused with implementation. Even pilot projects in areas in which there is little experiencein Liberia should be made the responsibilityof implementing agencies which can be other governmentdepartments, parastatals or the private sector. Although the specific functions of an energy planning administrationwill vary, the general obligationsinclude the following, which should become the main activities of the proposed Liberianenergy policyand planningdivision:

(a) Prepare and maintain an energy sector investmentprogram for a rolling ten year period with projects, programsand technical assistance requirements ranked in terms of priority, and specify the policy, planning and pricing requirementsfor the impLementationof this program.

(b) define and routinely update an energy resource inventory for use by the major production subsectors,and assist them in definingthe Least cost source of energy supply.

(c) maintain adequate records on economicand financialprices and costs throughout the energy economy and advise the government on the adequacy and impact of prices applied and their policy implications.

(d) provide assistance to the planning departmentsof the energy parastatalsin identifyingfuture markets and demand trends, especiallywhere these may be altered as a result of government intervention,through prospectivemajor projects or through changes in global demand for major export commodities.

(e) assist the governmentas the shareholderin the energy parastatals in defining and monitoring the objectivesand performance of each, and in reviewing subsector plans and major project proposals.

(f) work closelywith the Ministryof Planningand EconomicAffairs in order to define the relativeeconomic benefit and priority - 92 -

of energy sector investments and technical assistance in the overall public sector investment program.

Prerequisites for Effectiveness

5.8 To undertake these activities requires close and cooperative liaison between the energy planning division and the management of energy parastatals. The mission believes that this cooperation can only realis- tically be achieved if the work of the division is of high quality and if the parastatals believe that it is in their interests to communicate their problems frankly and openly. These conditions are only Likely to prevail if the energy planning division has real authority by virtue of being closely linked with the government's decision-making apparatus. The mission therefore recommends that the energy planning division be regarded explicitly as an advisory body to the EFMC, as well as to the Minister of LIE, and that the head of the energy planning division be made a member of the boards of the LEC and LPRC. With the Minister's permission the energy planning division should provide a regular briefing on the performance of the energy economy with respect to certain well defined objectives concerning the implementation of agreed policies, projects and programs of the implementing agencies.

Policies and Plans

5.9 The ORNL/GOL ongoing energy assessment and this UNDP/World Bank energy assessment provide the analytical basis and, to a large extent, the specific policies and projects of a precise prioricised energy sector investment program and, with matching objectives, plans and programs for energy sector management and development. Therefore the mission urges the COL to integrate these inputs into an agreed energy sector plan as soon as possible as the first stage of a dynamic annualised energy planning process and the basis of ongoing dialogue within the GOL and between the GOL and donors.

Manpower Needs

5.10 The DOE is poorly staffeq and has minimal administrative and logistical support in comparison with the importance of its task. USAID has provided considerable assistance in the form of a resident energy advisor and back-up consultancy services, though there are effectively only two additionaL professional staff including the Assistant Minister. The mission believes there is a need for at least three full-time professional staff other than the head of the DOE all with some economic skills but with technical training to match the priority areas for energy sector assistance and investment; namely, power, petroleum and household energy (forestry and biomass fuel conversion). It is essential that the staff of the energy planning division be experienced and well trained for they wilL be expected to gain the respect of the energy parastatal management, and to provide high quality advice to the top level of decision making in the government. At the same time, the planning capability of both the LEC and LPRC is expected to improve greatLy through the recommended - 93 - management service contracts. The mission believes that for the foreseeable future some portion of the staff will have to be contract expa- triates provided under various technical assistance arrangements and, accordingly, that there must be very strong emphasis on training Liberians for these responsibilities. The actual registered professional staff of the energy planning division should therefore be at least seven to allow for those in full time training both in-service in the energy subsector agencies and in higher education and short courses.

Technical Assistance

5.11 The USAID technical assistance program is budgeted to continue through September of 1985. It is desirable that this or a similar program of support be extended for several more years and that adequate resources are provided for manpower training and development. The mission recommends that expatriate support be extended to at least two full-time professionals, and that efforts be made to recruit both retired and junior professionals through the relevant volunteer agencies. There is also a minimum requirement of four man-years of training per year, including the higher education, short course and on the job training programs. Table5.4: ENERGYSECTOR INVESTMENT PROGRAM: 1984-1993 (USSmillion)

1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 Total %

1. CapitalInvestment A. Power Supply Generation 0.50 6.40 16.40 14.05 4.55 1,25 1.00 5.75 10.50 5.00 65.40 DlstrlbutlonlTransmisslon0.40 1.90 5.90 4.90 5.20 5.70 10.70 2.20 0.20 0.20 37.30

Subtotal 0.90 8.30 22.3 18.95 9.75 6.95 11.70 7.95 10.70 5.20 102,70 85

B. PetroleumSupply Port, storageand depot rehabIlItation 1,27 3.75 2.48 7.50 6

C. HouseholdSub-Sector Fuelwoodto BMC 0.30 0.50 0.8 I

D. HouseholdSub-Sector CharcoalklIns 0,10 0.10 0.50 0.25 1 Solar waterheatIng 1,0 1.0 1.0 1.0 4.00 to

Subtotal 0,10 0,10 0.05 1.0 1.0 1.0 1.0 4,25 3

2, TechnicalAssistance A. Power 0.2 0.55 0,85 0.50 0.50 0,35 0.10

8, Petroleum - Managementcontracts 0,08 1.00 1,00 1,00 - PetroleumhandlIng & depot design 0.20

C. Industry Industrialfuelwood 0.05

D. Households - Charcoalproduction/Import 0,15 0.10 - Rubberwood resources 0.15 - Householdcooking 0,03 0.10 - Solar waterheating 0,07

Subtotal 0,28 2.13 2.05 0,92 0,50 0.50 0.35 0,10 5.80 5

Total 1,18 12,11 25,70 22.40 11,25 8.45 13.05 9.05 10.70 5.20 122.08 100

Source: Missionestimates, Tables 2.8 and 3.10. Annex 1

ENERGYBALANCE, 1983 (103 TOE)

Indiganous imported Fuetwood Hydro Charcoal ElectricityLPG Gasoline AVGAS Jetfuei Kerosene Diesel Fuel Oil Total Total

Gross Supply 852.4 71.9 0.6 71.7 0.6 30.4 5.4 131.9 180.9 421.5 1331.5 1.1 Production 852.4 71.9 1.2 Imports 0.6 77.3 - 36.2 3,2 142.8 172.3 432.4 1.3 Stock Changes - (5.6) 0.6 (5.8) 2.2 (10.9) 8.6 10.9

C.ulverbion 2.1 PetroleumDepot Use (093) (0.1) (2.2) 2.2 ChdrcoalProductlon (69.5) 69.5 2.3 ElectricityProduction - (7119) 282.4 (54.4) (156.1) 2.4 ConversionLosses (222.3) 192.5 VI 2.5 ElectricityLosses (11.1)

Net Supply 560.6 69.5 78.8 0.6 71.4 0.6 30.4 5.4 77.4 22.6 208.4 917.3

DomesticConsumption 4.1 Mining 53.1 23.0 21.8 95.3 4.2 Other Industryb/ 4.4 2.8 0.2 0.6 0.8 8.8 4.3 Agriculture 1.9 1.2 4.5 4.4 Households 556.2 69.5 9.0 0.3 4.2 639.2 4.5 Iransport 70,2 0.6 30.4 46.4 147.6 4.6 CoxmercIal/Government 12.0 0.3 1.0 2.9 16.2

Source: Missionestimates Annex 2

ENERGYBALANCE, 1993 (103 x TOE)

Indigenous Imported Fuelwood Hydro Cnarcoal Electricity LPG Gasoline AVGAS Jetfuel Kerosene Diesel Fuel Oil Total Total

Gross Supply 1219.2 77,6 0.2 89.6 0.9 42.4 7.8 76.5 38.9 256.8 1553.1 1.1 Production 1219,2 77.6 0.2 89.6 0.9 42.4 7.8 76.5 38.9 256.8 1.2 Imports 0,2 89.6 0.9 42.4 7.8 76.5 38.9 256.8 1.3 Stock Changes conversion 2.1 PetroleumDepot Use (093) (0.9) (2.1) (3.3) 2.2 CharcoalProduction (11311) 113.1 2.3 ElectricityProduction (77.6) 132,9 (20.3) (35.0) (0.0) U 2,4 ConversionLosses (363,1) (88.7) (451.8) Oh 2,5 ElectricityLosses (6.6) (6.6)

Net Supply 743,0 113.1 37.6 0.2 89.3 0.9 42.4 7.8 55.3 1.8 197.7 1091.4

DomesticConsumption 4.1 Mining - - 4.2 Other Industry 10.2 3,5 0.4 1.8 15.9 4.3 Agriculture 1.9 1.8 7.3 11.0 4.4 Households 732.8 113.1 14,3 0,2 6.5 866.9 4,5 Transport 87,5 0.9 42.4 44.4 175.2 4.6 CommercIal/Government 17,9 1.3 3.2 22.4

Source: Mission estimates. - 97 -

Annex 3

BORDERPRICE BUILD-UP FOR LIBERIA,FIRST QUARTER, 1984

Conponent DieselOil Gasoline Fuel Oil Kerosene Unit Cost - (5/tonne)

(cents per US gallon) Basis as above Landed Price per tonne 252 283 188 265 Build-up cents/US gallon C&F 79.00 78.00 67.00 79.00 Wharfage 0.41 0.36 0.46 0.39 S1.30/te On-shore handling costs Jetty and Pipeline to Store-storage 0.36 0.36 0.36 0.36 15 cents/bbl Storage charges 0.60 0.60 0.60 0.60 25 cents/bbI CommonPipeline 0.13 0.13 0.13 0.13 5.254/bbl Demurrage charges 0.36 0.36 0.36 0.36 15 cents/bbl Brokerage fee (renegotiated) 1.58 1.56 1.34 1.58 2% of C&F Ocean and terminal losses 0.24 0.39 0.20 0.24 0.3% non-volatile, 0.5% volatile WorkingCapital 1.58 1.56 1.34 1.58 1 month,2%/month Insurance 0.08 0.08 0.07 0.08 0.1% CBF value

Depot Changes (LPRC) 0.60 0.60 0.60 0.60 25 cents/bbl

Wholesale cost 83.94 84.00 72.46 84.94

Delivery to retailand retailingcosts 5.69 5.69 5.69 5.69 1.5 cents/litre

Retailcost 89.63 89.69 78.15 90.03

Note: US gall/te 319 358 281 335 bbIs/te 7.60 8.53 6.67 7.99 Source: Missionestimates and LRPC. - 98 -

Annex 4

EX-DEPOT PRICE BUILD-UP: EXAMPLESOF GASOLINE, DIESEL OIL AND FUEL OIL (US$)

Component Gasoline Diesel Oil Fuel Oil

C&F Cost 0.78 0.79 0.67 Excise duty 1.25 0.30 0.29 Cost Stabilization Fund 0.50 - - LPRC Costs 0.40 0.40 0.40

Total Cost a/ 2.93 1.49 1.36

LPRC Margin -0.12 0.67 0.31

Ex-Depot Price 2.81 2.16 1.67 a/ As supplied by LPRC. Source: LPRC and mission estimates. - 99 -

Annex 5

L13ERIA - 1983 PURCHASE/SALESPATTERN ('000 bbls)

Motor Aviation Jet Gas Fuel LPG Gasoline Gasoline Kerosene Fuel Oil Oil Asphalt Total

Purchases by LPRC - 516 - - 43 590 12- - 1,269 LAMCO - 11 - - - 200 65 - 276 [MC - - - - - 184 993 - 1,177 BP/Mobil - - - 204 - - - 204 Total - 527 - - 247 974 1,178 - 2,926

Deliveries/ Sales to LAMM0 - II 0 0 0 200 65 - 276 iMC - - - - - 116 959 - 1,075 NIOC - - - - - 73 - - 73 Firestone - - - - - 28 - - 28 LEC - - - - - 183 103 - 286 Retail ., 478 a/ 4 15 207 289 b/ 20 2 1,015 Total 489 4 15 207 889 b/ 1.147 b/ 2 2,753 a/ Of which 6 sold to Mobil and Texaco. b/ Excludes bunkers. Includesuse by LPRC. Difference between purchases and sales also attributable to stock changes. c/ Actual usage in Liberia is higher as a result of unrecorded imports. Annex6 Page 1 of 2

ESTIMATEDOIL PRODUCTOONSUMPTION, 1983

Jan Fob Mar Apr May Jun Jul Aug Sep Oct Nov Dec Year

LPG a/0.1 0.1 - MotorGasollne 40.6 43,9 34.9 43,3 42.2 43.6 40.4 38.6 37.8 38.1 40.4 45.2 489.0 AviationTurbine Gasollne 0,4 0.4 0.4 0.4 0.3 0,3 0.3 . 0. 03 0.3 0.3 4.0 Kerosenea/ 2.1 0.1 0.2 2.2 1.8 2,2 1.4 1.4 0.7 0.5 1.0 2.0 15,6 Jet Fuel 21.7 14,8 20,7 19.1 18.1 16,9 14,4 20,0 15,1 IS,6 14,0 16,9 207,3 Gas/DieselOil b/ 83.4 76.7 102.0 115.4 82.0 66.8 61.0 49.7 58.9 56.0 57.8 79.0 888.7 FuelOl b/ 81.4 143.8 114.7 114,4 155.5 95.3 74.9 69.6 45.7 100.4 55*1 96.3 1147,1 Asphalt 0,1 0.3 0.5 0,2 o0l 0,1 _ - 0.1 1,5

Totalcl 229,8 280.0 273N4 295,0 300,0 225,2 192,4 179.6 158.6 210.9 168.6239.8 2753,3 o a/ Actualusage In Liberiasubstantially higher as a resultof unrecordedImports. b/ Data Includeestimated usage by LANCO, c/ Includesusage by LPRC and smallquantities of bunkers. Source:Based on LPRCGross Sales Sumary 1983. Annex 6 Page 2 of 2

LPRC - DEVELOPMENTOF OIL STOCKS, 1963

Gasoline Kerosene/JetFuel Gas Oil Fuel Oil s s s s End Month Storage Days' End Month Storage Days' End Month Storage Day5' End Month Storage Days' Stocks Capacity Supply Stocks Capacity Supply Stocks Capacity Supply Stocks Capacity Supply ('000 bbis) (a) (b) ('000 bbis) (a) (b) ('000 bbls) (a) (b) ('000 bbis) (a) (b)

January 4.8 6 3 10,6 21 20 2.8 3 1 137.4 56 2S February 19.1 24 17 17.4 34 26 37,9 39 14 50.9 22 14 March 4.9 6 3 II. 23 16 24.7 25 7 130.0 SS 36 April 21,3 26 16 23,5 45 37 31,2 32 iS 22.6 10 4 May 37.0 46 25 20,7 40 32 43,6 44 26 36,0 15 12 June 46,0 57 35 16,7 32 33 55,5 57 39 60,0 25 27 July 18.8 23 IS 15.9 31 23 33,5 34 32 128.7 54 63 a August 52.5 65 42 10,3 20 19 114,6 117 82 61,7 26 47 September 15.2 19 12 11.9 23 23 110.8 113 88 :54.0 65 51 October 36.7 45 29 12.7 25 25 84.6 86 63 S5.5 23 34 November 38.5 47 26 36.6 71 60 43.7 45 22 138.8 59 48 December 43.4 54 32 31.1 60 44 58.1 59 27 169.1 72 70 a/ t nominalLiRC storagecapacity including Intermediate and finishedstorage. b/ End month stocks calculatedin termsof days supplyon basis LPRC sales (oxludingown use) In followingmonth. Source; LPRC MonthlySoles Su-ales, Annex 7 Page 1 of 2

GASOLINEPRICES PAID BY LPRC COMPAREDTO INTERNATIONALSPOT MARKET LEVELS,1983

Motor Gasoline S/metric ton Delivered Cargo Platt's Spot Spot Assessed C&F Price Premia Paid Liberia (tonnes) Quotation(a) Freight (b) Market Price (c) Paid by LPRC by LPRC Internationalcargoes: Jan 8 2,501 283.5 8.5 292.0 321.5 29.5 Feb 6 2,7501 282.5 8.0 290.5 319.25 28.75 Feb 23 3,838 266.5 8.0 274.5 315.0 40.5 Mar 30 2,017 250.5 9.0 259.5 268.5 9.0 Apr 3 6,821 260.0 9.5 269.5 291.5 22.0 May 14 2,084 300.0 10.0 310.0 314.0 4.0 May 29 4,500 287.5 10.0 297.5 316.5 19.0 Jun 10 1,099 291.0 9.5 300.5 312.5 12.0 Jun 24 5,000 293.5 9.5 303.0 311.5 8.5 Jly 27 1,500 292.0 8.0 300.0 309.0 9.0 Aug 7 3,000 293.0 8.5 301.5 309.0 7.5 Aug 28 5,632 295.0 8.5 303.5 307.0 3.5 Sep 30 5,285 284.5 8.5 293.0 303.5 10.5 0 Nov 11 3,091 278.0 9.0 287.0 289.5 2.5 N Nov 11 2,000 278.0 9.0 287.0 288.0 1.0 Dec 12 5 751 269.5 8.5 278.0 288.0 10.0 Sub-total 5 TIIZT Local Cargoes: Jan 3 987 283.5 8.5 292.0 678.0 386 Feb 2 894 282.5 8.0 290.5 745.5 455 Mar 22 302 254.0 8.5 262.0 719.0 457 Oct 7 1,485 274.5 8.5 283.0 339.0 56 Sub-toLal 3,668 m77 Grand Totals 60,537 30

a/ Averages means quotationsfor barges fob Rotterdamand cargoesfob Italy during the week two to three weeks beforedelivery, i.e. at the time of loading. b/ For 30,000 dwt clean productstanker for singlevoyage to Liberiafrom Europe (averageof freight from Rotterdam and Italy). ct Spot fob price plus indicatedfreight. Annex 7 Page 2 of 2

DIESEL PRICIS PAID BY LPRC COMPARED TO INTERNAATiONALSPOT MARKET LEVELSp 1983

Diesel Oil $/metric ton Delivered Cargo Platt's Spot Spot Assessed C&F Actual CVF Price Premia Paid Liberia (tonnes) Quotation (a) Freight (b) Market Price (c) Paid by LPRC by LPRC

International cargoes: Jan 8 9,026 287.5 8.5 296.0 318.25 22.25 Feb 23 11,545 241.5 8.0 249.5 297.5 48.0 Mar 20 89969 234.0 9.0 243.0 257.0 14.0 May 14 4,997 245.0 10.0 255.0 259.5 4.5 May 29 5,997 235.0 10.0 245.0 254.0 9.0 Jun 10 4,390 238.0 9.5 247.5 262.0 14.5 Jun 24 4,059 241.0 9.5 250.5 264.0 13.5 Jly 24 3,107 239.5 8.0 247.5 260.0 12.5 Aug 7 3,600 243.0 8.5 251.5 260.0 8.5 Aug 28 5,770 250.0 8.5 258.5 256.3 (2.2) Sep 8 1,675 248.5 8.5 257.0 265.0 8.0 Sep 28 3,666 248.5 8.5 257.0 265.0 8.0 H Oct 2 1,600 248.5 8.5 257.0 265.0 8.0 Dec 18 8,929 247.5 8.5 256.0 250.0 (6.0)

Sub-total 77,330 14.7

Local Cargoes: Feb 7 1,113 260.0 8.0 268.0 585.0 317.0 Mar 22 701 234.5 8.0 242.5 601.0 358.5

Sub-total 1,814 333.0 Grand totals 79,144 22.0 a/ Averages mean quotations for barges fob RoLterdam and cargoes Fob Italy during the week two to Lhree weeks before delivery, i.e. aL the time of loading. b/ For 30t000 dwt cLean products tanker for single voyage to Liberia from Europe (average of freight from Rotterdam and Italy). c/ Spot price plus indicated freight. - 104 -

Annex 8

MAIN LPRC TANKAGE

Refinery Number Total CAP (Net) Type (bols )

Crude Oil 3 247,000 CR Unifiner charge (1) 1 19,100 CR Platform charge 1 2,700 FR Hydrotreater (1) 1 7,900 CR LPG 2 1,000 CYL Casoline 6 32,700 FR Kerosene/Jet Fuel 6 24,800 CR Diesel Oil 4 26,500 CR Fuel Oil 2 38,200 CR

Total 26 400,000

MOBIL TERMINAL Gasoline (2) 1 9,700 FR Kerosene 1 9,700 CR Diesel Oil 2 24,200 CR Fuel Oil 3 70,000 CR

Total 8 113,600

TEXACO TERMINAL Gasoline 2 33,700 DR & CR Kerosene (3) 1 4,900 CR Diasel Fuel 2 42,400 CR Fuel Oil 2 204,000 CR

Total 1 185,000

Notes: (1) Out of service 3/83 for roof repair. (2) Used for 100 Octane Avgas, by Mobil. (3) Second kerosene tank (No. 3) out of service Source: LPRC - 105 -

Annex 9 Page 1 of 6

ECONOMICSOF REFININGIN LIBERIAIN 1988 AND 1993

Basis of calculation:

1. Forecasts of future Liberian product demand, crude prices, European product prices and appropriate ocean freight rates as supplied by consuLtants to the assessment mission. The highest forecast for product demand is used to indicate the most favourable refining outlook (sincethe result is, in any case, negative).

2. All calculations in constant (1983) U.S. dollars.

3. Ex-refinery product value assumed to be at import parity, with product at spot prices FOB Milazzo.

4. Miscellaneous import charges (consular fees, throughput charges, inspectionfees, etc.) assumed to be equivalentfor crude and product imports, and not included in the calculation. These charges total 4-52 of CIF vlaue and differenceswill have a minor effect on the refinery economics.

5. LPG and asphalt volumesare small and are includedat kerosene and fuel oil prices respectively. In fact they are likely to fetch higher prices, but in each case have specific higher production and handling costs and require individual study if and when refining operationscommence.

6. Refinery fuel assumed to be 5% vol. Fuel oil equivalent on crude charged. This could be reduced following specific efficiency improvements.

7. European price of fuel oil to Liberian specification (1500 seconds Redwood I) calcuLated as 92Z high sulfur Bunker C, 8% Gas Oil.

8. Refinery produces all demand except Aviation Gasoline.

Forecast Data

1. Liberian Product Consumption - see Tables in Chapters I and II.

2. Crude and Product Prices: (1983 constant dollars) - Spot Market. - 106 -

Annex 9 Page 2 of 6

1984 1988 1993

"Marker"Crude, $/Bbl, CIF Ras Tanura 27.50 28.50 38.00 Bonny Light, $/Bbl, CIF Bonny 28.50 30.00 40.00 Products,FOB, $/tonne RegularGasoline 260.00 280.00 375.00 Kerosene/JetFuel 260.00 280.00 375.00 Gas Oil (Diesel) 245.00 255.00 335.00 High Sulfur Fuel Oil (3500 secs) 160.00 170.00 225.00 Liberian1500 sec. Fuel Oil 167.00 177.00 234.00

3. Freight rates, $/tonne Ras Tanura - Monrovia 14.90 18.30 19.54 50,000 ton Nigeria - Monrovia 3.20 3.90 4.20 50,000 ton Milazzo - Monrovia 30,000 ton clean 9.40 12.80 14.27 30,000 ton dirty 8.50 11.50 12.98 - 107 -

Annez 9 Page 3 of 6

1988REFINERY ECONOMICS

(l) ArabianLight Crude

Fuel Oil LPG Mogas Kero/Jet Gas Oil & Asphalt Total

EstimatedDemand. m Bbi 2 552 295 603 1,180 2,632 B/D 5 1512 8a8 1,652 3,234 7,211 S vol. on crude 0.1 21.0 11.2 22.9 44.8 100.0

ImportCost, FOB S/tonneFOB Milazzo 280 280 255 177

Bbl/tonne 12.4 8.6 7.9 7.5 6.7

S/BbI 32.56 35.44 34.00 26.42

FreightCost Milazzo - Monrovia, 30,000ton tanker,S/tonne 12.80 12.80 12.80 11.50

S/Bbl 1.49 1.62 1.71 1.72

ImportCost, CIF 5/Bbi 23.60' 34.05 37.06 35.71 28.14

US S million/year 0.05 18.79 10.93 21.53 33.21 84.51

Crude Oil Required: Saudi Arabian Light 2770 Bbl/year (includes 5% refinery fuel)

Price FOBRas Tanura 38.50 S/bl Freight S/tonne 18.30 Bbl/tonne 7.35 FreightSfBbl 2.49 CrudePrice, CIF Monrovia,S/Bbl 30.99

Crude cost, US millionS/year -5.84

GrossMargin, US millionS/year (1.33) OperatingCosts - RefiningOnly 7.20 RefiningProfit (Loss)US millionS/yr (8.53)

Note: No significantbalancing imports/exports should be requiredfor this case. Arabian Light yields approximately45% 650 plus residual with 3.1% sulfur, and 36% middle distillatein the 300 - 650 F range. Refineryfuel Is takenas 5% volumeon crude.

* Equivalentto keroseneop a weightbasis. - 108 -

Annex 9 Page 4 of 6

(ii) Forcados,Nigerian Crude (29.7'API)

Several of the Nigerian crudes have been considered for Liberia. Freight cost from Nigeria is low, but quality problems for a hydroskiumingrefinery have been identified,i.e. the 24-39'Cpour points of atmosphericresidues from Bonny crudes. Forcadosis consideredbelow. Distillationyields on Forcados would meet Liberian 1988 demand without balancingimports. Quality is not fully analysedand could be a problem.

Crude oil required,m Bbl/year 2770 Crude cost, FOB Forcados,$/BbL 29.00 Freight,$/tonne 3.90 Bbl/tonne 7.17 Freight 0.54 Crude Price, CIF Monrovia,$/Bbl 29.54 Crude Cost US million $/year 81.83

Gross Nargin, mm $/year (84.51-81.83) 2.68

OperatingCosts: Refiningonly 7.20

RefiningProfit (Loss)US million$/year (4.52)

Notes: 1. From the above it may be calculatedthat the crude price would have to fall by $1.72/Bblwith no change in productcosts, to break even. 2. No provisionis made in this calculationto providea return on the capital investmentrequired to rehabilitatethe refinery. 3. FOB price of Forcados crude assumed to be $1/Bbl below Bonny Light,which is the currentdifferential. 4. There would be no incentive to install visbreakingor other cracking to meet domesticdemand; export options are expected to be un- attractivedue to local surplusesof refiningcapacity. - 109 -

Annex 9 Page 5 of 6

1988 REFINERY ECONOMICS

ti) Arabian Light Crude

Fuel Oil LPG Mogas Kero/Jet Gas Oil & Asphalt Total

Estimated Demand, m ObI 1 611 342 522 270 1746 B/D 3 1674 937 1430 740 4784 % vol. on crude 0.1 35.0 19.6 29.9 15.4 100.0

Import Cost, FOB S/tonne FOB Milazzo 375 375 335 W

Bbi/tonne 12.4 8.6 7.9 7.5 6.7

S/Bbl 43.60 47.47 44,67 34.92

Freight Cost Milazzo - Monrovia, 30,000 ton tanker,S/tonne 14.27 14.27 14.27 12,98

S/BbI 1,66 1.81 1.90 1.94

Import Cost, CIF S/Bbl 31.40 45.26 49.28 46.57 36.86

US million S/year 0.03 27.65 16.85 24.31 9.95 78.79

Crude Oil Required: Algeria 44- API, SBbI 40.48 Freight S/tonne 10.93 Bbl/tonne 7.9 Freight SJBbi 1.38 Crude cost, CIF 41.86 Crude cost, US million S/year 76.93 (on 1837 m 8bis)

Gross Margin, US million S/year 1.85 Operating Costs - Refining Only 7.20 Refining Profit (Loss) US million S/yr (5.35) - 110 -

Annex 9 Page 6 of 6

Effectof EnergyEfficiency Imgrovewents

EstimatedCapital Cost: $8.0 million

EstimatedSavings: Fuel reduced from 5X to 3Z on crude

i.e. 21 on 4800 B/D - 35,040Bbls/year

Valuedat $41.68/Bbl- 1.46 million/year

These savings could justify the capital investmentin the refinery if operating,but would not significantlyimprove the basic refinery economics. - 111 -

Annex 10 Page 1 of 3

REFININGOPTIONS

"Mothballing"the Refinery

The mission strongly recommendsscrapping of the refinery,not mothballing. However,mothballing has been commencedby LPRC, according to general procedures,the missionhas reviewed these proceduresand its commentsare as folLows:

1. The procedurelacks definitionand specificationof protective materials to be used. ParticuLarlyfor externaL protection,protective greasesformulated for such servicesshould be used.

2. The procedureprovides for blankettingonly vesselswith inert gas. It is recommendedthat all equipmentbe dried and filled with inert gas - nitrogen - and a small purge and positive pressure be maintained at all times. This will protect all equipment from internal corrosion. Connectingpipework valves may all be left open and the units blinded at battery limits. This will in effect simplify the mothballingprocedure and could eliminatethe need to pull at heat exchangerbundles.

3. It is recommended that alL flow, temperature and pressure transmittersand pressure relief valves be removed and stored in a dry storagearea. Pneumaticlines also be purged with nitrogen.

4. Motors should similarlybe removedand kept in dry storage.

5. Treatmentof the coolingwater circuit is not included in the procedure. It is recommendedthat a corrosion inhibitor be added to circulatedwater, and the water systemcompletely shut in, other than for pressurerelief.

6. It is highly probable that in Monrovia's climate, corrosion will proceed rapidly beneath the insulation. Sedling of the insulation cover to prevent moisture ingress is difficult. Therefore,all insulation should be removedand the steel painted with suitablecorrosion in- habiting primer (lead or chromate). Insulationwould be replaced prior to re-startup. When the refinery was inspected in January 1982 by UniversalOil ProductsCompany, of Des Plaines,Illionis, it was observed that most of the insulationwas deterioratedand should have been renewed in any case.

The cost of LPRC's mothballing program was estimated at $500,000by LPRC's technicalmanager. The mission estimatesvary between $490,000 and $460,000, depending on whether the above recommendations were adopted. To allow an adequate contingency,it is suggesced that $500,000be acceptedas the estimateof mothballingcost in 1984. - 112 -

Annex 10 Page 2 of 3

In subsequent years, it would be necessary to maintain a small security force (say 3 men per shift), a few painters for continuing paint maintenace, plus technicaL and general supervision. The cost of this service, including materials and utilities required, is estimated ac $400,000/year.

Reactivating the Refinery

In the event that a change in economic conditions would favour a resumption of refining operations in the future, the following main steps would have to be taken:

1. Reverse the mothballing procedures, which involves removal of protective materials, replacement of motors and instruments, etc.

2. Inspection of all equipment and making good of any deficiencies;

3. Re-insulation of the entire plant;

4. Complete the installation of the desalter, new reformer comr pressors, and new overhead condensor structure;

5. Make those improvements necessary to bring the refinery up to modern standards of efficiency, which are essential if the refinery is to be competitive. Mainly, these measures include improvements to all heaters by addition of convection tube surface; installation of stack oxygen analyzers; recovery of crude tower gas for use as fuel; installation of crude to tower overhead heat exchangers;

6. Purchase inventory of crude oil;

7. Purchase spare parts, chemicals, catalysts, maintenance materials;

8. Reactivate the refinery organization, i.e. hiring of employees, reestablishing offices, vehicles, etc.

The cost of the above work is estimated as follows:

$ Million

Reversal of mothballing procedures, replacement of instruments and motors, install desalter and compressors, etc. 1.5

Re-insulate entire plant (5Z of replacement cost) 1.5

New catalyst charges 0.4 a/ - 113 -

Annex 10 Page 3 of 3

Purchaseof vehicles,parts, supplies 1.0 b/

Purchaseof crude inventory: 120,000 Bbls at $30/Bbl 3.6 c/

Total, excludingefficiency improvements 8.0

EfficiencyImprovements:

New crude/toweroverhead exchanger, new convectionsections in all heaters, recoveryof crude gas, oxygen analyzers: 8.0

Total Investment $16.0 dl a/ The catalyst was virtually new at refinery shutdown,however, re- placementcost is added as a contingency. b/ Vehiclesand parts are already purchased,however, conditioncannot be guaranteedin storage,hence full contingencyis added. cl Crude inventory fee would not be relevant if crude purchasing arrangementprovided for example90 day credit. di If all contingenciesare not required,reconmissioning is estimated to requirea minimum of $11 million. - 114 -

Annex 11

LPRC STAFF DISTRIBUTION AND NUMBERS

1. Top Management and Front Office Support Staff 14

2. Marketing 14

3. Administration 46 Motor PooL 44 Security 64 Public Relations 8

4. Accounting 43

5. Warehouse and Purchasing 29

6. Maintenance 11l

7. Operation 80 Technical Services 29

Total LPRC Staff 482

LPRC STAFF - ESTIMATE OF MANPOERENEEDS

Jetty Supervisor 1 Jetty Operation, 3 per shift 12 Tank Farm Shift Supervisors 4 Tank Farm Operators. 3 per shift 12 Loading Rack Operations (days) 2 Security, 3 per shift 12 General Laborers 10 Maintenance 20 Management: General 1 Ops and Purchasing 2 Lab and Technical 1 Accounts 1 Office 5 Laboratory 3

86 - 115 -

Annex 12

SCHEDULEOF INSTALLEDAND AVAILABLE GENERATING PLANT

Tear of Capacitiesin NW Power Station Unit No. Construction Instatled Available

Mount Coffee (Hydro) 1 1964 15.0 15.0 2 1965 15.0 15.0 3 1972 17.0 17.0 4 1972 17.0 17.0

Bushrod (Gas Turbines) 1 1966 15.5 0 2 1969 14.7 10.0 3 1973 19.1 0 4 1973 19.1 0 Bushrod (MediumDiesels) 1 1961 2.0 0 2 1961 2.0 0 3 1963 2.75 0 4 1963 2.75 0 5 1963 2.75 1.5 Luke (Slow Speed Diesels) 1 1979 14.0 11.0 2 1980 14.0 12.0 3 1982 14.0 0

Total Lov Speed Diesels 42.0 23.0

Total (All Units) 186.65 98.5

Source: AfDB AppraisalReport, LEC, Site inspection. - 116 -

Annex 13

STATISTICS ON THE NATUREAND PERFORMANCEOF GOVERNMENT ISOLATEDPOWER SYSlEMS, 1982/83

Gallons Fuel kV Peak Deumand GWh Location S of Customers Consumed Installed (dkW) Gonerated

Harper 1.058 402,168 1,300 1,200 4.20 Gbarngs 1,050 576,000 4,560 a/ 1,500 6.00 Greenville 1,000 367,920 1,000 900 3.90 Volnjama 700 270,927 1,300 1,000 2.90 Zwedra 640 287,524 1,300 580 3.0 SanniquelIl 524 298,800 950 0a0 3.20 Kolba City 245 106,020 285 240 1.20 -hllefanal 100 92,292 333 150 1.00 RCbertspPort 320 143,100 505 450 1.50

5,637 2,544,100 11,553 6,770 26.90 (7,513-Gbornga) a/ Gbernge has 2-2.5 NW units out of service. Remaining unit has effective capacity of 539 kW. Annex14

HISTORICALTRENDS IN SALESANO GENERATION

Sales ------Salos Generated From Real True GDP Residential Commercial Industrial Government mines Excl. Mlnes Total Sales Outout FIC Total Sales Growth Year OGh S Growth Wh S Growth G"h S Growth GWh I Growth G#h S Growth (h I Growth Wih S Growth GWh I Growth Wh 9 Loss Growth I

1970 79 40 13 31 72 165 255 277 16,9 1971 68 -13.9 43 7.5 21 lO0 22 -29 81 IT.5 160 -1.8 241 2.6 303 9.4 26,6 8.9 5.2 1972 59 -13.2 46 7.0 35 29.6 24 9.1 94 16.0 164 2.5 258 7,1 329 4.6 28.7 5.8 3.5 1975 66 1109 52 13.0 42 20.0 18 -25.0 93 -1,1 176 6.5 271 5.0 349 6.1 29,1 9,5 .1. 1974 34 -16.2 56 7.7 42 0 16 -1i.t 99 6.5 166 -5,6 267 -1,5 366 4.9 55.9 4.6 3.6 1975 s0 -7.4 61 8.9 36 -14,3 16 0 65 -14.1 163 -3.0 £48 -7.1 356 -2,7 59.0 2.6 -3.4 1976 61 22,0 63 3.3 40 11.1 20 25.0 92 8,2 184 12.9 276 11,3 387 6.7 36,6 11.6 3.8 1977 75.5 24.1 754 19.7 43.4 B.5 23.0 15.0 71,6 -22.2 218 16.5 290 5,1 399 3,1 32,7 11.4 -0.1 1978 8654 12MS 75.7 0,7 44.3 2.1 21.1 -8.5 42.0 -41,3 227 4.1 269 -7.2 405 1,5 37,1 11.0 4.0 1979 90.8 6.3 94.4 24.4 45,0 1.6 23.8 12.8 32.1 -23.6 254 11.9 286 6,3 432 6.7 36.2 10.6 4.9 1980 68.0 -3,1 69.3 -5.4 51.3 14,0 34.3 44.1 31.5 -1.9 263 3.5 295 3,1 428 -0.9 33.4 -0.8 -4.7 1981 68.0 0 89.8 0,6 35 3 -31e2 33,6 -1.5 25.3 -19.7 247 -6.1 272 -7.8 401 -6.3 7.0 35.0 -3.9 -4.4 1902 86,1 -2.2 69,8 0,6 34.1 -3.4 34.8 3.0 34.1 34,6 241 -2.4 275 1.1 380 -5.2 32.1 35,6 -2.4 -6.7 1963 89.7 4.2 90.6 9.1 22.5 -54.9 33.9 -2.6 36.7 7.0 237 -1.7 273 -0.7 362 -4.2 39.5 34,4 -1.7 -6.5

Sourcesi Charles T. Plln Rorto ORMLReort, LEC. _ 11s -

Annex 15

LIBERIA ELECTRICITYCORPORATION ACTUAL1983 ANDPROJECTED INCOME AND EXPENDITURE STATElENTS FOR FINANCIALYEARS ENDED 30th JUNEBASED ON UNAUDITED1982/3 ACCOUNTS (1983 Dollars)

1982/3 1983/4 1984/5 1985/6 GWh Glh GWh GUh

Generation Hydro 260 261 275 285 Thermal 106 97 85 94 ex BNC 35 401 45 403 40 400 30 409

Sales BMC 34 37 35 35 Other 236 270 236 273 239 274 263 298

000 gal OOOS 000 gal 0005 000 gal OOOS 000 gal OO0S Fuel Oil 4828 3380 5172 3620 5862 4103 Gas Oil 3648 3283 1001 901 854 769

Total cost 8630 6663 4521 4872

ooos 0005 ooo0 ooos Sales 35850 39450 lessDisct. 269 395 Net Sales 34991 35400 35581 39055 Other income 1052 36043 1100 36500 1200 36781 1400 40455

Fuel cost 8630 6663 4521 4872 BMC Purchase 1300 500 op. & Maint. 13747 14000 14000 12000 Bad Debts 4469 4445 1846 1644 Depreciation 7191 34037 730 33708 7500 28367 7800 26316

Operating Surplus 2006 2800 8414 14139 Less Interest 4729 4900 5000 6000

Profit/(Loss) (2723) (2100) 3414 8139

Source: Mission estimates. - 119 - Annex 16 Page 1 of 4

PROPOSEDREGULATIONS AND CORPORATEREORCANIZATION TO ENABLE TEE LIBERIAN ELECTRICITY CORPORATIONTO ENFORCE COLLECTIONOF UNPAID BILLINCS AND TO REDUCE ILLEGAL CONSUMPTIONOF ELECTRICITY

LEC should immediateLyembark on an intensivecampaign to make consumersand the general publicaware of the following:

(a) That despite the high level of tariffs, LEC is operating at a loss and that this loss is the direct consequenceof electricity obtained fraudulentlyby substantialnumbers of electricity consumers.

tb) That LEC is anxious to improvethe reliabilityand availability of electricitysupply and to lower rates, but that this cannot e achievedwhile electricityin excess of 35% of total electricity production is not received by the corporation,either because bills are not paid, or because electricityis obtained fraudulently.

-c) That improvementin reliabilityand expansion of electricity services requires investmentof large amounts of capital which the LEC cannot obtain from potentialfinanciers as long as its accountsshow such a dismal record of losses.

Cd) That the LEC proposes to implementforthwith a "get tough" program by rigorouslyenforcing the measures cited herein.

Draft Regulationsand Action Programmeto reduce non-technicallosses:

1. Any consumerwhose account is outstandingmore than 8 weeks from the date of his/her last meter reading is liable to immediatedisconnec- tion without prior warning. The period of grace allowed for the paymentof bills will be reduced by one week every six months until it is reduced to 30 days;

2. Any consumer paying his bill in full, incLudingarrears, within 21 days from the date of the last meter reading will receivea discount of 5 percent.

3. Any consumer disconnectedfor non-paymentof his account by the due date will be liable to pay the following before he will be reconnected:

(a) the outstandingaccount in full;

(b) a reconnectionfee of $50;

Cc) A security deposit equal to 1.5 times the monthly average consumption. The LEC will pay interest at its current borrowing rate on said depositsto be creditedannually to the consumer. - 120 - Annex 16 Page 2 of 4

4. Any person receiving electricityfrom the LEC through an unautho- rized unmeteredconnection, or a metered connectionwith an inoperative meter, will be given a period of grace of 14 days to apply for an authorizedconnection, and within this period will be liable to pay the normal connection fee. In addition, such persons will be liable to pay to the corporationan surchargeof 50Z on the first seven bills submitted as compensationfor their previous illegal consumption.

5. After the grace period any person found with an illegalconnection, or a tampered meter, will be subject to immediate disconnection, legal action for recovery of damages by the Corporation,a connection fee of $100 for a first offense and $250 for a subsequent offense,and the lodging of a security deposit to be determinedby the corporation. The LEC shall be permitted to refuse to connect any premises where an illegal connectionhs been found until such time as it receivesadequate financial security and compensation.

6. The LEC will arrange for all meters to be sealed and a consumer whose meter seal is broken may be regarded as having an illegal connection.

The Need to EstablishCredibility

The LEC will have to satisfy its consumers and the pubLic of its bona fides and its desire to ensure that all customersreceive equal and fair treatment. There appears to be an impressionamongst the public that bills presentedby the LEC are not based on the amount of electrcity consumed,and that the amount of the bill does not reflect attempts made by consumersto reduce their consumption. In this regard, the mission is concernedthat more than 14,000 bills sent out (half of the total!) are based on an estimateof consumptionand not on meter readings.

The mission therefore suggests that the following are among desireablesteps to be taken to reassurecustomers:

1. It should be made abundantlyclear to all LEC staff, particularly those directly or indirectlyconcerned with meter reading, billing and connecting/disconnectingelectricity supply, that the LEC expects to receive their total co-operationand loyalty. If there is no such provision at present, that severe penalties (including instant dismassal) are prescribed by LEC for any of its employees discoveredto have participatedin any way in attemptsto defraund LEC or its customers.

2. Bills not based on actual meter readings should only be issued in exceptionalcases, e.g., where the consumer does not have a meter, vhere the meter is not accessibLe, where the meter is clearly faulty,and so on. - 121 - Annex 16 Page 3 of 4

3. There should be a complete separation between meter reading, billing and collecting on the one hand, and disconnections on the other. The former should remain a function of the commercial department (CD), while the latter would more appropriately be part of the T&D department. The Energy Monitoring Unit (ENU), reporting directly to the MD, could usefully verify actions taken and safeguard interests of both the LEC and its customers.

4. Bills not based on actual meter readings should only be issued in exceptional cases, e.g., where the consumer does not have a meter, where the meter is not accessible, where the meter is clearly faulty, and so on.

5. There should be a complete separation between meter reading, billing and collecting on the one hand, and disconnections on the other. The former should remain a function of the commercial department (CD), while the latter

6. Customers should be made aware that:

a. Any consumer questioning the accuracy of his electricity meter may apply to have his meter tested on payment of a deposit of $30. Should the meter prove to be outside the LEC's accuracy limits (2Z either way), the meter will be repaired or replaced, and the consumers account will be credited with the amount of the deposit. If the meter is within the LEC's tolerance limits, or shows signs of having been tampered with, the deposit will be forfeited.

b. Any consumer wishing to question the accuracy of his bill may do so in writing to the General Manager of the LEC within 10 days of the time of the meter reading, giving details of the name and address, the account number, and the reading of the meter at the time the complaint is made. Such a complaint does not absolve the consumer from making payment of the previous account within the stipulated period of 6 weeks. Consumers will be advised of the outcome of any investigation and will receive an amended bill if their compLaint is found to be justified. Where it is not possible to establish the correct meter reading the LEC will charge on the basis of the average consumption during the previous three months.

7. The object of the substantially higher meter reading charge is to discourage consumers who regard such requests for testing as a means of avoiding being billed for some useage.

8. Complaints received from customers in respect of 4b. above should be processed in the first instance in the EMU which is already responsible for meter testing. - 122 - Annex 16 Page 4 of 4

9. Any instructionsfor connectionor disconnectionissued by the CD to T&D must be in writing with a copy to the EMU.

10. The mission is of the opinion that the present systemof meter reading, billing and colLecting is not effectiveand would support an applicationby the LEC for technicalassistance for its restructure.

11. Meter readers should be urged to report any illegal connections, since their failure to make reports can only be regardedas participation in attempts to defraundthe LEC.

12. Initiallyspecial arrangementsmay have to be made to cope with the huge volume of illegal connectionswhere there is acceptanceby the consumer concernedof the penaltiesand resupplyarrangements listed above. Any delay in connectionshould not be used as an excuse to continuein the interimwith unmetered supply.

Governmentdebt to LEC

Government accounts represents a substantial proportion of outstandings($15 million by the end of 1983) and they have increasedby $2.7 million over the preceeding6 months. LEC should be allowed to offset the amount it owes against the amounts owed to LEC, and government departmentsand agencies should be required to settle their subsequent accountwithin the same periods laid down for other consumers.

There should be no free categoryof consumerswithin or outside of the LEC. Accordinglyall recipientsof "free" electricityshould be meteredand billed. If it is deemed essential to provide some benefit to top management by way of payment for electricitythis should be in the form of a moderate cash grant, therebyenabling these staff to experience the true cost of their consumptionjust as is intendedfor consumersat large.

Need for PowerfulLegislation

Legislationmust be implementedas a matter of urgency to give LEC powers to enforce the above-mentionedregulations. - 123 - Annex 17 Page 1 of 2

ASSUMPTIONS FOR ENERGY AND POWER SECTOR DEMAND FORECAST

A: Global Assumptions

1. GDP and electricity consumption trends on the Public component of the Monrovia Power System have shown a close association over the past decade or so as documented in Appendix 3.3. Thus the future demand for electricity on the MPS can be related to some extent to future GDP growth.

2. GDP growth in the modern sector is sharply influenced by the productivity of the iron ore enclave sector. Several projections of iron ore production, and of GDP growth were made by Bank staff during the first quarter of 1984. The most likely scenario for GDP growth and iron production is as follows, and is used for all energy sector demand forecasts outside of traditional fuels.

GDP Growth Iron ore rate, Constant Prod'n Year 1982 Prices a/ mtpy

1982 -6.7 18.1 1983 -6.5 14.6 1984 2.5 14.8 1985 3.9 15.5 1986 1.8 15.0 1987 -1.2 13.0 1988 -11.0 7.5 1989 3.4 7.5 1990 3.4 7.5 1991 3.4 7.5 1992 3.4 7.5 1993 -29.0 0.0 1994 3.5 0.0 1995 3.5 0.0

a/ Excluding non-monetary GDP.

B. Specifc Assumptions: Monrovia Power System

1. The LEC will introduce measures by July, 1984 to ensure that:

(a) Consumers pay their bills within 60 days of each meter reading (a period that is graeually to be reduced to 30 days);

(b) Customers who do not pay their bills within the required period are disconnected, and are not reconnected until aLl outstandings and fees for reconnection have been paid; -124 - Annex 17 Page 2 of 2

(d) All meters and their connections(if exposed)are sealed;

Ce) Pending the installationof meters the premises of all unmetered consumersare inspectedand their consumptionassess- ment verifiedand/or adjusted;

(f) Illegal connectionsare effectivelycut and the tenantsand/or owners of the properties attemptingillegal reconnectionare prosecuted;

2. That this "get tough" policy receives complete GDL backing, particularLyin the form of legislationenabling LEC to proceed in law againstanyone defraudingthe LEC or tamperingwith its meters or installations. 3. That LEC continuesits agreementwith BMC, ensuringfull utili- zation of hydro generating capacityand providingfor additionalsupply from BMC to LEC eitherby exchangeof purchaseinthe dry season;

4. That a tariff reduction is offered to consumersat the com- mencement of the 1986 wet season, by which time there should be a sub- stantialrecovery in LEC's financialposition;

5. That there is efficientmaintenance of LEC's plant and an adequate level of spares is held available, so as to ensure that 'least Cost operatingprocedures are applied at all times. In particularLEC shoudl avoid the use of the gas turbines,so as to keep them available for emergenciesfor as long as possible,and to minimize their high fuel costs. In addition,it is accepted that the "get tough" policy will not become fully effectivefor some time, and that even after the end of 1986 15 GWh of non-technicallosses cannot be recovered. 251 of consumptionnow effectivelyfree is assumedto be lost if it has to be paid for. Annex 18 LIBERIA ELECTRICITYCORPORATION - HISTORICALAND PROJECTED SALES (GWh)

Residentldi ComnmercialIndustrial Government Total Mine Total Non-tech Technical Transfer Real Real Sales GOP Year Sales Sales Sales Sales ex Mine Sales Sales Losses Losses Losses Losses Growth Growth - percent-

1982 86 86 34 35 241 34 275 77 56 3 35.6 -2,4 -6.7 1983 90 91 22 34 237 37 273 70 54 4 34.4 -1.7 -6.5 1984 91 92 23 33 239 35 274 67 55 4 33.8 -0.3 2.5 1985 102 104 24 33 263 35 298 47 55 4 28.0 1.3 3,9 1986 114 118 26 34 292 30 322 26 57 3 22.1 2.5 1.8 1987 123 126 27 34 310 25 333 I5 56 3 18.9 232 -1.2 1988 126 131 27 34 308 25 343 15 54 3 17.8 2.6 -11.0 1989 122 127 26 33 308 30 338 i5 53 3 18.1 -3,0 3,4 1990 128 135 25 33 321 23 344 IS 54 3 17.7 4,0 3,4 La 1991 133 140 26 35 354 Is 349 15 55 3 17.5 3.9 3.4 1992 138 146 27 36 347 6 353 16 56 3 17,4 4,0 3,4 1993 142 150 25 36 353 5 356 16 57 3 17.3 1.7 -29,0 1994 135 141 23 35 334 0 334 16 56 2 17,9 -5.1 3.5 1995 139 140 24 35 338 0 338 16 56 2 17.8 1.2 3,5 1996 146 146 24 36 352 0 352 16 57 2 17.4 4.0 2000 171 171 28 40 410 0 410 18 67 3 17.2 Av. 3.9 2003 192 195 32 42 461 1 461 19 75 4 17.5 Av. 3.9

Source: Missionanalyb5e, Annex 19

LIBERIAELECTRICITY CORPORATION - HISTORICALAND PROJECTEDGENERATION MIX AND FUEL CONSUMPTION

…---- Fuel Use ------Transfer Total Max, ------GenerationMix ------LuKe GTs Bushrod Total BMC Year ex EIC Generation Demand. Hydro Luke GTs Bushrod Fuel Oil ------Gas Oil ------Fuel Oil ------GWh ------mW ------GWh ------…------(000 US gallons)------

1982 32 380 72 276,3 62.8 31.9 5.9 5,331 4,691 488 5,179 2,169 1983 39.5 362 70 262.3 47,2 49,0 5.5 3,255 7,206 454 7,660 2,669 1984 45 355 70 260 69 22 4 4,828 3,235 413 3,648 3,041 1985 40 364 71 280 75 4 5 5,172 588 413 1,001 2,703 1986 30 378 72 285 85 3 5 5,862 441 413 854 2,027 1987 21 388 72 285 95 3 5 6,552 441 413 854 1,419 1988 27 388 73 285 93 3 5 6,552 441 413 854 1,824 1989 26 383 72 285 90 3 5 6,207 441 413 854 1,757 1990 28 388 73 285 95 3 5 6,552 441 413 854 1,892 1991 34 385 74 285 95 3 5 6,552 441 413 854 2,297 1992 35 393 75 285 100 3 5 6,897 441 413 854 2,365 1993 38 396 76 285 108 3 0 7,448 441 441 2,568 1994 27 381 71 278 100 3 0 6,897 441 441 1,824 1995 28 384 71 281 100 3 0 6,897 441 441 1,892 1996 30 397 74 285 109 3 0 7,517 441 441 2,027 2000 60 438 83 285 148 5 0 10,207 735 735 4051 2003 90 461 92 350 113 6 0 7,793 882 882 6,081 - 127 -

Annex 20 PARALLELOPERATION OF BMC AND LEC SYSTEMS: The Need For and the Requirementsof a FeasibilityStudy

Electricityis supplied from LEC to BMC during the wet season from surplus hydro output, while BMC supplies LEC during the dry season. At no time, however,does BMC's generatingplant operate in syncronywith LEC plant. Even within BMC's system there are two sectionswhich are electricallyisolated at all times, apparently with extensive safety interlocksto preventaccidental connection. The need to have two separate sections (increasingto three when LEC supplies to BMC) is probably the result of using switchgear bought when the anticipatedgenerating ccpaciLCywas much lower than at present. The present fault level with all generating plant in use is likely to be in excess of the breaking capacityof the switchgear.

Since the supply from LEC arrives at BMC at the end of some 50 km of 69 kV transmissionline, it is possible that the increasein fault capacityif LEC is synchronizedeven with part of BMC's plant is within the breakingcapacity of the switchgear,but this is unlikely. It is in any case understandablethat BMC does not wish to lose output as a result of irregularitieson the LEC systemafter having gone to so much trouble to avoid problemswithin their system.

The disadvantageof the present arrangementis that the amount of energy that can be transferredin either directiondepends ultimately on the demand of that part of the system linked with the other at any particulartime, and this can be varied only by switchingin or out consumer groups, probably in fairly large blocks. Particularlyat times when LEC suppliesBMC with surplushydro capacitythis inevitablyresults in a proportionof the hydro output being wasted.

The particularbenefits of operatingthe LEC system in parallel with one of the BMC sectionsare as follows: (a) Increasedoperational flexibility and the ability to make the maximum possible use of hydro capacity, with a corresponding saving in fuel oiL imports. (b) BMC would be able to supply the small and reLatively short period peak loads of LEC s demand in the wet season, elimin- ating the need to start up thermal machines to meet these loads. (c) It should be possible to minimize the number of thermal units in use at any time during the dry season. It will be necessary to study the BMC and LEC systems with a view to determiningthe fault levels for all the plant items that may be in use at any one time, with LEC and part of BMC operating in parallel. Specificationsare required for switchgearand protectiverelays (e.g., under-frequencyand/or under voltage) that will satisfy BMC's engineers that in the event of a fault on either system the systems will be isolated before BMC's breakers are required to deal with a fault level beyond their capacity. - 128 -

Annex 21

NOTES OF THE COST OF PRODUCTION FROM MODERN SLOW SPEED DIESELS

o Equipment type: 150-160 rpm diesel enginei o Size range: order of 8-20MW now commerciallyavailable o Main manufacturers: M.A.N.,Sulzer, GVM/B&W. O Capitalcost installedfor large installations,15-20 MW plus: $900. o Operatingcost: $20 per kw per year. O FueL cost in Liberia: economic cost to concession and the LEC is approximately70 cents/US gallon for fuel oi, of 3000-3500 secs. redwood. O FueL efficiency:19.1 kWh/US gallon or 44.7% thermal efficiencyat the generationterminals for most recentmodels. O Maintenance costs: $12 per MWh including lube oil o output in the Monrovia Power System at 56.5Z load factor is 8760 x 0.565 = 4949.4 kWh per kw of capacityper year. O In plant power consumption1.5% of output.

This yieldsan averagecost of 7.34 cents/kWh. J

- 129 - Annez 22 Page 1 of 2

WOOD FIRED STEAM POWER IN LIBERIA: 35 MW SYSTEM

Parameters

o Plant capacity of 15 MW in steam derived power would provide dry season base load during the entire dry season. The actual power to be producedwould be 72.27 Cwh.

o Auzilliarieswould consume5-8Z of the power produced.

o The average load factorwould be 552.

o The wet season would provide adequate time for planned maintenancewhich would hold forced outages to a minimum of less than 5% of the availabletime.

o Overall efficiencywould be 18%.

o Fuel would be a combinationof 1 meter by 25-30 cm logo, and chips, at 25Z m.c.w.b.at the boiler. Calorificvalue would be at least 14.3 NJ/kg for 101,000tonnes.

o Fuel would be pricedat an averageof about $14, deliveredfrom plantations

o Cost of plant:fresb-water and tower cooling,condensing plant:

a. boilers,turbines, condensors, conveyors 10,460,000

b. buildingsand foundations 1,902,000

c. Auxiliaries l,901,000

d. Silos, fresh wvter systems,tanks, stokers 4,755,000

e. Civil works 555,000

f. Constructionengineering 150,000

19,723,000

o Life of Plant: 20 years

o Maintenanceand Insurance:32 per year or $591,400.

o Labor and salaried staff:

85 technical 342,200 13 administrative 52,000 $394,200 - 130 - Annez 22 Page 2 of 2

Cost of Production

$/Pa C/klh

a. Capital charges Discount rate - 10Z for 20 years 2,307,500 3.19

b. Operations and maintenance Maintenance 394,200 Labor 394,200 Insurance 197,200 985,600 1.36

c. FueL 110,000tonnes at $13.92 per tonne 1,531,788 2.12 4,824,888 6.6l7C/kih at busbar - 11 -

Annex 23

OPERATIONS COST OF COAL FIRED STEAM GENERATING PLANT IN LIBERIA, PORT OF MONROVIA o Basis: Coal price $45 (FOB) + $25 (Freight) + $15 handLing = $85 per tonne o Calorificvalue: 29 NJ/Kg.

O Efficiency:25X, i.e., 2 kWh/kg (20 NW sets) o CapitalCost: $1,400 per kw - 20 yrs e 12% o Annualizedcap. cost = $168 per kw p.a. operatingcosts: $30/kwp.a. o Maintenance:$1(MNwh output:8760 x 56.51 = 49 x 9 kWh/KW/annum o Variable costs = 4.25 * 1.00 = 5.25 c/kWh o Fixed costs:$198/kw p.a. o Average cost per generatedkWh @ 56.5% LF = 9.25 c/kWh o Assuming in-houselosses of 3Z. o Ave-age cost per kWh sent out = 9.54cJkWh.

If efficiencyis 20Z (e.g., with smallerunits) the average cost per kWh becomes 10.89c/Kwh. - 132 -

Annex 24

6ENERATIONEQUIPMENT FOR GOVERIENr ISOLATEDPOWER SYSTEMS LIBERIA, 1983

Power Station Installed Capacity Age of Location U of Units Kilowatts GeneratorSets Manufacturerts)

Harper 2 1,300 1-5 MirrleesBlackstone Gbarnga 2 N.,A MAN +1 4,580 6 MIrrleesBlackstone Gregeville 3 1,000 9 MirrleesBlackstone Voinuja ba 2 1,300 4 MirrlnesBlackstone Zwedru 3 1,300 7 MirrleesBlackstone Sanniquoilie 1 950 7 Caterpillar KolbeoCity 2 285 8 Caterpillar Bellefanal 1 333 7 MirrleesBlackstone Robertsport 2 505 7 Caterpillar ANITAa7 2 1,078 N.A. Mlrrlees8lackstone KolalbunS" 1 300 6 N,A. Tappita ' 2 1,280 N.A. N.A.(Prob.Mirrlees) Foya a/ 2 1,332 N.A. N.A,(Prob. Mirrlees) Zorzor a 1 640 N.A. N.A.(Prob. Mirrlees) a! Not yet in service bI Two additional units available, but not yet in service 2 x 640 kw. - 133 - Annex 25 Page I of 4

COMPARISON OF WOOD-STEAM vs. WOOD CASIFICATION POWERPLANTS 1/

Parameters Base Case, 500 kW:

o Capacity of 500 kw with single unit plants, i.e., single boiler, singe turbogenerator, and singLe gasifier, single diesel generator.

o Auxiliaries will consume 4-6X of gasifier plant output and 5-8Z of steam plant output.

O The plant load factor will be 551.

o Fuel will be delivered in meter length pieces to plant up to 30 cm in diameter. The boiler will burn the pieces with no further processing. The gasifier will chip and dry the wood to 201 mcwb.

O Fuel will be delivered to each plant at 501 mcwb at $44.65 per tonne.

o Additional cost for drying and chipping $2.15 per tonne

o Specific Wood Consumption

Steam plant, 3 kg/kWh; Gasification plant, 1.5 kglkWh

o Total Wood Consumption per year

Steam plant - 7227 tonnes; Casification plant - 3613 tonnes

o kWh's produced per year: 2,409,000 kWh

1/ Based primarily on data extracted from the report Prefeasibility Study on the Development of Power in the Liberian Rural Areas, DECON, November 1983, corrected and/or modified as needed. - 134 - Annex 25 Page 2 of 4

o Cost of plants ($):

Steam Plant Gasification Plant

Boiler & Firing Equipment 157,000 Gas Generator, gas clean-up, and wood conveying 178,895 Auxiliaries 129,000 25,000 Turbogenerator and Condensor 147,000 Diesel Generator & Condenser 422,775 Building and Foundations 73,600 72,125 Civil Works & Construction Engineering 143,400 120,450 Wood dryer and Chipper 130,755 Total 650,000 950,000

Plant Life (years) 15 10

o Maintenance and Repair - 6% of Capital Cost per Year

Steamplant- $39,000; Gasification plant - $57,000

o Labor (technical operation only)

Steam plant at 7% = $45,500 Gasification pLant at 6% = $57,000

Cost of Production $ c/kWh Steam Gasif. Steam Gasif.

Maintenance and Repair (M&R) a/ 39,000 57,000 1.62 2.37 Labor 45,500 57,000 1.89 2.37 Fuel 322,683 169,135 13.39 7.02 Capital Cost Recoyery b/ 85,150 154,850 3.53 6.43 Total c 20.43 18.19 a/ Gasification M&R includes lube oil charge of .4e/kWh b/ Steam plant recovered in 15 years at 10% and gasification plant recovered in 10 years at 10%. c/ The 11% difference in production costs is barely significant at this level of analysis.

In order to define the cost advantage crossover point, 2 additional plant sizes were examined, 100 kW and 1,000 kW. - 135- Annex 25 Page 3 of 4

For the 1,000 kV plant:

Changes in Parameters

o Steam Plant Capital Recovery stretched out to 20 years as per historical norms; gasification plant remains 10 years

o Efficiency of steam plant 15%; for gasification plant 24%

o kWh's produced annually by each 4,818,000

o Specific wood consumption of steam plant 2.25 kg/kWh

o All other assumptions the same, or based on the same values as for 500 kI plant comparison

o Cost of Plants C$) Steam Plant Gasification Plant 1,200,000 1,90o,o0o

o Cost of Production Gasifi- Gasifi- Steam cation Steam cation (usT Tc/kWhT

Maintenance and Repair 72,000 114,000 1.49 2.37 Labor 84,000 114,000 1.74 2.37 Fuel 484,100 321,300 10.05 6.67 Capital Cost Recovery 140,400 309,700 2.91 6.43 Total 16.19 17.84

For the 100 kW Plant Change in Parameters o Steam plant capital recovery in 15 years; gasification plant recovery in 10 years

o Efficiency of steam plant 6Z; for gasification plant 18%

o kWh's produced annually by each 481,800

o Specific Wood consumption Steam plant - 6 kg/kWh

o Cost of Labor - 12% of Capital Cost

o Cost of Maintenance and Repair - 10% of Capital Cost

o All other assumptions are the same as, or based on, the same values used for the 500 kW plant comparison - 136 - Annez 25 Page 4 of 4

o Cost of Plants ($) Steam Plant Gasification Plant 235,000 200,000

o Cost of Production Casifi- Gasifi- Steam cation Steam cation (US$F Tc/kWhT

Maintenance and Repair 28,200 24,000 5.85 4.98 Labor 23,500 20,000 4.88 4.15 FueL 129,074 45,O96 26.79 9.36 Capital Cost Recovery 30,785 32,600 6.39 6.77

Total 43.91 25.26

45 x - Steamplants 40 o - -- - gasification plants

: ~ \ ~ 0

20~~~ ~t -~* ~ ---- 0_ 15

100 200 300 400 500 600 700 800 900 1000 kil owatt rating - 137 -

Annex 26

NOIlS ON THE ESTIMATIONOF LONGRUN MARGINAL COSTS (LRMC) FOR THE MONROVIAPOWER SYSTEM

A. Low Speed Diesels (refer to Annex 3.10 for expandednotes)

o Capitalcost estimate is $900/kv, 150-160 rpm, 8-10 MW units. O Life is estimatedat 20 years o Discount rate applied is 10X o Operatingcost is $201kW per annum o . Fuel cost in 70 cents/USgallon for fueL oiL o Maintenancecosts: $12/MWh

LRKC for Low Speed DieseL.engine - generators:9.30 cents/kWh

B. Hydropower

o Expansionof Mt. Coffee Plant at design capacityof 17 MW o Estimated cost based on recent installationsof similar size: $1120/kw including all additional power house and civil works for both the first and second 17 NW unit. o MaintenAncecost: $5/MWh o Annual load factor based on load forecastprovided is 43.5%.

LRMC for Hydropower: 3.92 clkWh - 138 -

Annex 27

FIREWOODPRICES - LIBERIA, FEBRUARY, 1984

Weight of Price per Cooking COst of Bundle a/ sold Bundle and Energy Price per efficiency energy Place tonne Value unit energy (PHU) utilized (12% mcwb ave.) (te) (MJ/kg) (f.MJ) % (t/1AJ

Monrovia City Markets 14-21 kg SI.50/bundle 17.3 b/ 0.50 13 3.9 Newport a Meringo St. ($85/te) Benson/Center St. 11 kg S1.00 17.3 0.53 13 4.1 (591/te) Ninth St., Sinkor 27 kg S1.35 17.3 0.29 13 2.2 (S50/te) 1.4-1.8 kg 10t 17.3 0.36 13 2.8 (563/te) Small ad hoc stall 13 kg 50.50 17.3 0.22 1.7 inside inner city settlements (538.50/te)

36 miles from Monrcvia towards Gantar c/ 9.5-12.5 kg 25f 17.3 0.14 13 1.1 (29/te)

158 miles from Monrovia towardsGantar 8.7-11.0kg 25f 17.3 0.15 13 1.2 (S25/te) a/ Samples of firewood bundles were weighed and the moisture content measured in each marketplace. b/ This is the lower heating value of wood ot 12% ncwb with an average energy value oven dry of 20 MJ/kg. c/ Gantar is a town situated close to the Guinea border on the main highway of Liberia.

PHU = Percentage of heat utilized.

Source: Mission measurements. !Mnnex CHARCOALPRICES - LIBERIA,FEBRUARY 1984

Form & Weight Price Per Cooking of Unit Unit and EnergyValue Price per Efficiency Cost Per Unit of Locatlon Purchased Per Tonne (as measured) Unit Energy (PHU) Heat Utilized (MJ/kg) (f/MJ), (¶IAIJ)

MonroviaCity Markets Newportand MeringoSt, Small retail Loose heap of 10 cents 29.7 parcel (common 0.4-0.5kg (22.2t/hg) 0.75 24 3.12 throughout) (0.45kg av,)

Large retailparcel S2.50/bag "ironwood" 17-21.0kg bags S131/to 29.7 0.44 24 1.84 "rubberwood" 9.5-13 kg bags S222/te 0.75 24 3.12 fother"bush" wood 13-17.5kg bags $165/to 0.55 24 2.30

Ninth St. Sinkor (unknown"bush" species) 15 kg (av.)bags S2.25 29.7 0.51 24 2.13 Benson& CentreSts. (unknown "bush"species) 18 kg (av.)bags S2.25 29.7 0.42 1.75

25 miles out of Monrovia rubberwood 15 kg (av)bags 12.00/bag 29.7 0.45 24 1.87 other "bush"$ wood 16.5 kg (av) bags $2.25/bag 51.33/te

Wholesaleat Forest CharcoalingSite

Cape Mount & Bong Counties 16-21kg S1.50/bag 29.7 0.33 1.33 bl 50 miles av. haul (18.5kg av. or 54 bags per tonne) plus 30t/baga/ transport(097/te)

Grand Bassa 51.00 bag 0.26 1.10 b/ plus 45f/bag a/ transport(578/te) a/ At 32,2f/tonne km. b/ Price If deliveredunder contract to commercial/industrialconsumers or for export. PHV - Percentageof heat utilized;av. a average. Source: Missionmeasurements at each marketplace,plus laboratoryanalysis of charcoalsamples for the mission. Annex 29

FORESTRESOURCES OF LIBERIA,1983, ESTIMATE OF ANNUALWOODY BIOMASS PRODUCTION

Proportion Estimated Estimated of total AverageStanding Blomass Mean Annual Increments(Mal) ForestType Area land area per hectare Total Volumeper ha Total Volume ('000ha) (m3) (millionm3) (m3) ('000m3

ClosedBroadleaved Forests Virgincommercial high forests 905 9.4 250 226 1 905 Logged-overhigh forests 425 4,4 200 85 3 1,275 Non-commercialVirgin high forests 590 6,1 200 118 1 590 Mangroveand coastalforest 80 08 50 12 0.5 40

Sub-total 2,000 20.7 441 2,810

ForestFallow (I,e.,previously cleared area now under shiftingcultivatlon 5,500 57.1 75 413 3 16,500

Open BradleavedForests WoodlandSavanna 40 0,4 30 1 0.5 20 CoastalSavanna 40 0.4 30 1 0.5 20 0

Subtotal 80 0.8 2 40

Formations(coastal) (derivedfrom repeatedcultivation and burningIn coastalareas) 100 1.0 20 2 0.2 20

Plantatlons Rubber plantatIonsab 162 1.7 289 47 12 1,896 Timberplantatlonns - 5 negligible 120 1 20 100

Subtotal 167 1.7 48 1,976

OverallTree Cover 7,847 81.3 906 21,346

a/ See Annex30. b/ See Annex 31. Source: FAO, 1981, ConsultationwIth FOA; IBRD and missionestimate5. - 141 -

Annex 30

ESTIMATEDRUBBER TREE STAND IN LIBERIA,1983

EstimatedMean

Total Area a/ AverageStanding Bilomass - Annual Increment (ha to 3 nearest100 ha) ('000n ) (sv) ('000a ) (sv)

Large Plantations 28,900 5,780 Firestone LAC/UnIroyal 9,900 1,980 Guthrie 7,500 1,500 Liberia 2,600 520 Salolo 2,500 500

Subtotal 51,4W 10,280 411

S2IaIiholders plantations (average12 ha farms) 111,000b/ 36,630 1,465

Total 162,400 46,910 1,876 a/ Given ongoingcleaning and replantingthese estimatesare only indicative,through adequatefor establishingthe energyresource Implications.Smaliholders will probably reduceplanting directly and hence biomassproduction over time. b Area of seallholderrubber crop establishedin 1979 survey funded by the bank was 114,250ha. From "*is has been substracted3,250 ha which Is the estimatedarea of rubber trees clearfelledfor woodfuelsclose to Monroviabetween 1979 and 1964. cl PlantatIonsestablished by large compantesare assumedto have a standingvolume at naturityof 220 m3 based on mensurationdata gatheredin Papua New Guinea. The FDA sampled the smaliholderrubber farm standingbiomass for the mission in March 1964, establishingan averagevolume of 330 3 per ha. Since negligiblereplanting ha taken place in recent ears an averageretrievable standing biomass of 200 . /ha for plan' tationsand 330 n /ha for s5ailholdersfor these estimates. d/ Assumes for this calculationan averageeconomic lifeof 25 years and an even age dis- tributionwhich in practiceIs quite lumpy scuh that the age of the prment crop Is heavilybiased towardsthe top thirdof age classes. Source: Firestone Co., IBRD-funded survey of 1979. FDA measurements for mission and missionestimates. - 142 -

Annex 31

PLANTATION TIMBER RESOURCES IN LIBERIA 1983

A. Bomi Hills Plantation Plantation Area (ha)

Smelina Arborea 1960 Eucalyptus sp 320 Pinus sp a/ 790 Others a/ 940

B. Cape Mount Plantation

Pinus sp 927 a/ Estimated. Source: FDA and World Bank. Annox 32

CU*NT ANDPROJECTED WOOFUIEL USE BY HOUSEHOLDS

1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993

Populatlon('000) Monrovia 374 397 419 444 470 479 525 555 585 616 648 Other Urban 359 379 405 427 451 477 505 534 561 591 623

TotalUrban 733 776 824 871 921 974 1,030 1,089 1,146 1,207 1,271 Total Rural 1,355 1,389 1,421 1,453 1,484 1,515 1,546 1,577 1,614 1,649 1,665

Total Populatlon 2,088 2,165 2,245 2,324 2,405 2,489 2,576 2,666 2,750 2,856 2,956

ActualFuel Use ('000te) Monrovia 91 96 101 107 114 120 127 134 142 149 157 Firewood& Residues Charcoal- Actual 49 52 55 58 61 65 68 72 76 80 84 - two 433 460 485 514 544 575 608 643 677 713 750 Other Urban Firewood& Residues 153 162 173 182 193 204 216 228 240 252 266 Charcoal-Actual 28 30 32 34 36 38 40 42 44 47 49 - two 252 266 284 300 316 335 354 375 394 415 437 Rural Firewood& Residues 1,380 1,414 1,447 1,480 1,511 1,543 1,547 1,606 1,644 1,679 1,716 Charcoal- Actual 21 21 22 22 23 23 23 24 25 25 26 - two 185 190 194 198 202 207 211 215 220 225 230

PrimaryFuel Use (two) Urban 929 984 1,043 1,103 1,167 1,234 1,305 1,380 1,453 1,529 1,610 Rural 1,565 1,604 1,641 1,678 1,713 1,750 1,785 1,821 1,864 1,904 1,946

Total 2,494 2,588 2,684 2,781 2,880 2,984 3,090 3,201 3,317 3,433 3,556

PrimaryFuel Use (toe) Urban 316 335 355 375 397 420 444 469 494 520 547 Rural 532 545 558 571 582 595 607 619 634 647 662

Total 848 880 913 946 979 1,015 1,051 1,088 1,128 1,167 1,209

Losses In CharcoalProdoitlon (too) 228 241 252 266 278 293 308 324 339 355 372

Note: two * tonnesof wood equlvalent; toe - tonnesof oil equivalent, Sources: Mission estimates; consultation wIth OOE,GOL, Annex 33

CASE3: WOQOFUELSSUPPLY AND DEMANDTO MONREOVIAHOUSEHOLDS

1983 1984 1965 1966 19J7 1988 1989 1990 1991 1992 1993

Population,'000 374 397 419 444 470 497 525 555 595 616 648 Numberof People using charcoal('000) 247 262 277 296 301 328 346 360 386 407 538 Numberusing firewood and rosidues 127 135 142 151 160 169 179 189 199 209 116

WoodfuelDemand Actualwelght Charcoal('000 teo 49 52 55 58 61 65 68 72 76 80 84 Firewood('000 to) 91 96 101 107 114 120 127 134 142 149 157

Wood equivalent(two) Charcoal 252 266 284 300 316 335 354 375 394 415 437 Firewood 91 96 101 107 114 120 127 134 142 149 157

Total 343 362 385 407 430 455 481 509 536 564 594

WoodfuelSupply (two) Local fee seavenging(10% of households)('000 to) 27 28 30 31 34 35 37 39 42 44 46 Charcoalfrom hinterland ('000two) 252 266 284 300 316 335 354 375 394 415 437 Firewoodfrom hinterland ('000two) 64 68 71 76 50 85 90 95 100 105 III

Supplyfrom Hinterland Weight (at 25% mewb), 000 two 316 334 355 376 396 420 444 470 494 520 548 Volume (solid),'O00 0C 528 558 593 628 661 701 741 785 825 868 915

AnnualClearfelling lmpil3d As high forestat 100 m /ha 5,280 5,580 5,930 6,280 6,610 7.010 7,410 7,850 8,250 8,680 9,150 As retiredrubber trees (ha) 1,760 1,860 1,997 2,093 3,950 2,370 2,470 2,617 2,750 2,893 3.050

Source: MissionEstimates. - 145 -

Annex 34

PRICE BUILD-UP FOR CHARCOALIN LIBERIA, 1984 (per beg of 9-21 kg; avg 17.3 kg)

S Comments

Price in the Forest from the Charcoaler 1 00-1.50 depending distance from the m.3rket

Transport by trucker/buyer or 50-65 cents vzries with distance though contract trucker negotiable

Economic cost of transport (17-25 cents] 50-75 miles for truck (World Bank, WATM) carrying 10 tonnes charcoal with 57 bags/to.

Bulk Storage 0-10 cents delivered direct to most retail outlets.

Handling from Bulk Storage to 0-10 cents doesn t apply when retailers delivered direct to retail outlets

Retail inarkup 15-75 cents if retailer incurs all hani!ing and storage charges, repacking of heavy bags occurs so as to yield a higher margin.

Retail Price in bags 2.25-2.50

Retail markup if sold in 0.45 kg lots 1.55-2.40

Retail price per bag equivalent for charcoal sold in 0.45 kg lots 3.90

I = Not included In addition.

Source: Mission fieldwork. Annex35

ENERGYSECTOR INVESTMENT PROGRAM: 1984-1993 (USSmillion)

1984 1985 1966 1987 1986 1969 1990 1991 1992 1993 Total %

1. CapitalInvestment A. PowerSupply Generation 0,50 6,40 16,40 14,05 4,55 1,25 1.00 5,75 10,50 5,00 65,40 Distribution/Transmisslon0.40 1.90 5.90 4.90 5.20 5.70 10,70 2.20 0.20 0.20 37.30 Subtotal 0.90 8.30 22.3 18,95 9,75 6,95 11,70 7.95 10,70 5,20 102,70 85 B, PetroleumSupply Port,storage and depot rehabilitation 1,27 3,75 2,48 7,50 6 8. HouseholdSub-Sector Fuelwoodto GNC 0.30 0,50 0.8 I D. HouseholdSub-Sector Charco3lkilns 0.10 0.10 0.50 0,70 Solarwater heating 1.0 1.0 1.0 1.0 4,00 Subtotal 0.10 0.10 0.50 1.0 1.0 10 1.0 4,70 3 2. TechnIcalAssistance A, Power 0.20 0.65 0,85 0,75 0.50 0.50 0.35 0,10 .0 S. Petroleum - Managementcontracts 0.08 0,.'0 0.60 0;60 - Petroleumhan"ilng & depot design 0,20 C. Industry Industrialfuelwood 0.05 D. Households - Charcoalproduction/import 0,15 0.10 - Rubberwoodresources 0.15 - Householdcooking 0,03 0,10 - Solar water heating 0,07 Subtotal 0.28 1,83 1,65 1.42 0.50 0.50 0.35 O,IP 6,68 S TotI 1.18 11.80 28.30 23.35 11.25 8.45 135(5 9,05 10,70 5,20 122,33 100 Source;Mission estimates, Tables 2,8 and 3.10, IBRD 12867R - \ ~10 9eB1_N_ L. OWFA\.W. M#....._ % e _d n,, _ ,;,F"1 y / 7s\~~~ _ .0f b"C AAI* cm n 76m L Iw

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